Wage Garnishment Limits: What Creditors Can and Cannot Take

Federal Wage Garnishment Limits Under the Consumer Credit Protection Act (CCPA).

The federal government has set wage garnishment restrictions under the Consumer Credit Protection Act (CCPA). The caps guarantee creditors can still collect their debts while shielding workers from disproportionate wage reductions. The Debt Collection Improvement Act permits federal agencies or collection companies under contract with them to seize up to 15% of disposable income to pay up defaulted debts.

Under federal law, the highest sum that can be deducted from an employee’s disposable income (wages after legally mandated deductions such as taxes and Social Security) is 25% of disposable income or the total amount by which disposable earnings exceed thirty times the current federal minimum wage ($7.25 per hour as of 2024). The lesser amount from both applies.

Special Garnishment Laws for Certain Debts

Some debts like child support and federal student loans have special rules that can be used for higher garnishment amounts. Knowing what debts are subject to high garnishments can help you plan your finances to avoid difficulty.

Alimony and Child Support:

Up to 50% of disposable earnings could be garnished if the employee is supporting another dependent or up to 60% if they are not. If the employee is more than 12 weeks behind in payments, an additional 5% may be garnished.

Federal Student Loans:

Without a court order, the U.S. Department of Education may garnish up to 15% of disposable earnings to repay defaulted federal student loans.

Unpaid Local Taxes:

The IRS determines garnishment amounts based on exemptions related to the taxpayer’s filing status, number of dependents, and considerations such as State Unemployment Insurance tax.

State Wage Garnishment Laws

Many states have laws that place extra restrictions on wage garnishment, even if federal law establishes baseline protections. States can restrict the percentage that can be collected or outright forbid garnishment for specific debts. Tennessee generally restricts wage garnishment to the lesser amount of 25% of disposable income or a weekly income exceeding thirty times the federal minimum wage. Employers and employees must review state legislation to understand their rights and obligations.