January 9, 2009
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News: Protection During Garnishment.
Once a person has had their wages attached by garnishment for credit card debt, they have few good options left. However, they are not without some protection. In the first place, there is a limit as to how much of the employee's paycheck the credit card lender can withhold. The amount taken is adjusted according to how much of the person's total disposable earnings can be kept. The employee must still have some income to live on. Title III of the Consumer Credit Protection Act guarantees this. In addition, legally required deductions like federal, state and local taxes are protected. FICA and other mandatory deductions pertaining to retirement and Social Security considerations are also protected. After these, the credit card lender is also limited on the remaining percentage by this U.S. Department of Labor's Title III provision.
So, the credit card lender is only allowed to exact not more than 25% of the employee's disposable earnings per pay period nor more than 30 times the federal minimum hourly wage as specified by Fair Labor Standards Act of 1938, Section 6(a)(1). Whichever is lower is the amount allowed. This is a blanket law and applies to, not only this credit card debt but, all garnishments in effect at any given time.
Here's the way that works. In a case where the person's disposable weekly income (after required deductions) is $650; if the 25% rule is applied, then the credit card lender would be able to claim $162 of it. This leaves the employee with $487.50 to live on for the week. On the other hand, if the minimum wage ruling were to be applied, then the attachment will always be $196.50 (as long as long as minimum wage continues to be $6.55 per hour). This would only leave the employee with $453.50 to survive for the week. In this case, the first method will be applied because it is the lesser of the two. Right now the dividing line between which rule is applied lies at a person's disposable income being at $786 per week. Above that figure, the 30-times the minimum wage will be applied. Below that figure, the 25% rule will be applied.