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Paul Tracy

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Updated August 5, 2020

What is a Wage Execution?

Also called garnishment, a wage execution is a process under which money owed or paid to a borrower is given to a creditor instead.

How Does a Wage Execution Work?

Let's say John Doe has stopped paying child support to his ex-wife. His ex-wife takes him to court for the money owed and obtains a garnishment, whereby the court seizes a portion of John's monthly paycheck and automatically gives it to his ex-wife.

Wage execution is often used to recoup back taxes, delinquent child support or judgments, and the courts have the ability to garnish not just wages, but bonuses, commissions, pension income, and distributions from retirement plans. Welfare, unemployment, veterans benefits, social security income, workers compensation and child support payments generally cannot be garnished.

The Consumer Credit Protection Act prohibits employers from firing employees because their earnings are being garnished, though there are some exceptions.

Why Does a Wage Execution Matter?

Wage executions generally require a court order, and they can destroy a person's credit rating. It is important to note that not all things can be garnished; state laws set forth the exemptions. Usually, state laws prohibit garnishing a person's assets to the extent that they leave the borrower with no way to support himself or herself.

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Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers.

If you have a question about Wage Execution, then please ask Paul.

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