Employee paychecks can be sliced and diced by creditors whose goal is to regain back the most amount of money owed on a loan, as quickly as possible. Sometimes this process can result in wage garnishment. You might be asking what this term means for you, and how you can stop it from occurring.
Wage garnishment is a process in which a creditor can remove a portion of your paycheck every time you receive compensation to repay a defaulted loan. This can be detrimental to your financial security, and often results in messy situations with little to no wiggle room. Without an escape route from this problem you could be facing years of compensation deduction due to defaulted loans.
In Arizona, there is a limit to how much a creditor can remove from your paycheck. Both federal and state law can protect your wages from completely disappearing, as creditors can only garnish nonexempt wages. Usually wage garnishment is court ordered or by a government agency sent directly to your employer. Your employer then withholds a certain percentage or dollar amount from your check to satisfy creditors.
Some instances creditors can garnish your wages in Arizona are as follows:
• Unpaid income taxes
• Court ordered child/spousal support
• Defaulted student loans
The full details of how much a creditor can extract from your paycheck will never exceed the cost of living. This amount can vary, and often does not agree with our idealized amount of money needed to live comfortably. Although individual states are allowed to enforce sterner limits Arizona abides by Federal law. Creditors cannot remove more than 25% of your weekly earnings or 30 times the federal minimum wage on your non-exempt weekly wages.
Child & Spousal Support Guidelines:
Federal law limits creditors from removing more than 50% of your disposable income to pay owed child support. Automatic income withholding orders are standard practice in these types of cases. Keep in mind, if you are supporting a child this rule applies. If you are not supporting a child in your immediate care up to the court to pay off child support can garnish 60% of your wages.
Student Loans
Student loans are tough to pay off, and can take even longer than most loans as students typically have less disposable income to pay off incurred student loan debt. Defaulting on student loans gives the U.S. Department of Education the right to garnish your wages up to 15% of your disposable income until the loan is paid.
Unpaid Income Taxes
The federal government can remove a portion of your weekly wages based on how much you owe back in taxes. The dollar amount owed will dictate the percentage of wages the government can garnish from your wages. Your deduction rate and dependents on your tax returns plays a big part in the percentage the government can deduct as well.
Will I lose my job?
According to federal law, employers cannot dismiss or fire you if the government imposes wage garnishment on your disposable income. Although, more than one garnishment order federal law can no longer protect you, and you are susceptible to losing your job.