By Michael Fagan
You’ve figured out which garnishments take priority, and established a process. So what’s next to consider?
Once you determine which garnishment to pay, it is equally vital to withhold the correct amount. That requires understanding disposable income, the amount that remains after legally required withholding (e.g., social security, federal, state and local taxes, and Medicaid). Personally elective deductions such as 401k contributions, union dues, personal health care contributions and other individually elected withholding do not reduce the amount subject to garnishment.
Under federal law, the maximum amount of garnishments is the lesser of the following two calculations:
25% of disposable earnings, or
The amount by disposable earnings are greater than the current Federal minimum wage multiplied by 30.
The minimum wage that results in a garnishment presently is $217.50 (30 x $7.25). However, if someone earns less than $290, only the disposable income in excess of wages above $217.50 (not the 25% maximum) can be garnished. Disposable earnings above $290 are subject to the 25% maximum. When pay periods cover more than one week, it is the combined total that matters. A bi-weekly pay with one week less than $217 but a combined total greater than $434 would still result in garnishment.
There are also exceptions to this rule, however. A larger amount of wages is subject to garnishment for bankruptcy, child support, or state or federal tax payments. Up to 50% of disposable income can be garnished for child support or alimony if you’re supporting more than one spouse or child, and 60% if you aren’t doing so. A further 5% may be garnished for support payments that are more than 12 weeks overdue.
Any confusion or disputes over the priority or amount of garnishments should be referred to either a legal counsel and/or the court that issued the garnishment order. It is far better to be safe than noncompliant!