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Wage & Bank Account Garnishments
Money & Debt Topics, Work Topics
This content was last updated on 5/31/2022
- Judgment Creditor (or Creditor) - a person or business who says someone (a debtor) owes them money and they got a court order saying the debtor has to pay
- Judgment Debtor (or Debtor) - a person or business who owes money and there is a court order to make them pay
- Judgment - an order entered by a court when someone sues another person and wins. A money judgment means the order has to do with getting money that is owed
- Wage Garnishment - taking part of a debtor's pay/salary to pay what is owed to the creditor
- Garnishee (or Third-Party Garnishee) - a person or business (usually a bank) that has money or property that belongs to the judgment debtor.
- What is a garnishment?
A garnishment is a court order that a creditor can ask for so they can get payment for an unpaid judgment they have against a debtor.
A creditor can only get a garnishment AFTER they sue the debtor and get a judgment. The garnishment helps them collect the money owed to them.
The garnishment is usually between the creditor and the garnishee (likely an employer or a bank) who is holding money or property that belongs to the debtor (like salary or money in a bank account).
- How does the creditor get a garnishment?
After getting a court judgment, a creditor applies in writing to the court asking the court to issue a Writ of Garnishment. This writ goes to the garnishee and says the garnishee has to turn over the debtor’s money or property to the creditor.
The creditor states in the application to the court that the debtor owes them money for a judgment. It has to also say that the debtor isn’t paying voluntarily, and that the garnishee has money or property that belongs to the debtor, and this money can be used to pay the debt.
The court serves the papers on the garnishee. The garnishee has to verify that they have the debtor’s money. For example, that they are the debtor’s employer or bank. Once this is verified, the court orders the garnishee to pay the money to the creditor.
- What is a wage garnishment?
A wage garnishment is an order from a court or a government agency that is sent to your employer. It tells the employer or the government agency that they are required to take a certain amount of money out of your paycheck. This money is sent directly to the judgment creditor.
Different garnishment rules apply to different types of debt. There are legal limits on how much of your paycheck can be garnished.
- When can an employer garnish your wages in Kentucky?
Usually, creditors have to get a court judgment that says you owe the creditor money before they can get a wage garnishment. For example, if you are behind on your credit card payments or owe a doctor’s bill, those creditors can’t garnish your wages unless they sue you and get a judgment.
There are some exceptions to the above rule. Your wages can be garnished without a court judgment for the following things:
- Unpaid income taxes
- Court-ordered child support
- Back child support
- Defaulted student loans
- What wages can be garnished?
Only disposable earnings can be garnished. The term "earnings" means money you get for things like wages, salary, commission, or a bonus. It also includes regular payments you get from a pension or retirement program. Disposable earnings are the amount of earnings left after you subtract the deductions that the law says you have to subtract. The law says you have to subtract:
- federal income tax withholding
- federal social security tax
- state and local tax withholding
There might also be deductions on your paycheck for things like union dues, and health and life insurance premiums. You do not get to use these deductions in figuring out your disposable earnings.
- Are there limits on wage garnishments in Kentucky?
Yes. Kentucky law limits how much can be garnished from your paycheck. You should have enough after the garnishment to still pay for living expenses.
On a weekly basis, the garnishment cannot be more than:
- 25% of your disposable earnings OR
- The amount by which your disposable earnings for that week exceeds 30 times the federal minimum wage
The garnished amount will be the lower amount of these two calculations.
EXAMPLE: Say your disposable earnings are $500 per week.
- Under the 25% method, the creditor could garnish $125. That’s 25% of $500.
- Under the 30 times the minimum wage calculation, the creditor could garnish $282.50
- the minimum wage is $7.25
- 30 X $7.25 = $217.50 (that’s 30 times the minimum wage)
- $500 - $217.50 = $282.50 ($500 is your pay minus $217.50)
- the garnishment could be $282.50
In this situation, the creditor garnishes $125, because it’s the lower amount of the 2 calculations.
- If I have more than 1 garnishment, is there a limit to the total amount that can be garnished from my paycheck each week?
Yes. If you have more than 1 garnishment, the total amount is limited to 25% of your disposable earnings.
- Are there different limits for child support, student loans and unpaid taxes?
Yes. Each of these are talked about below.
- Child Support Garnishments
Now, all court orders for child support include an automatic income withholding order. This means the child support you pay is taken out of your paycheck. If there is no income withholding order, the other parent can get a wage garnishment order from the court if you get behind in your child support payments.
Federal law sets the amount that can be taken from your paycheck for child support.
- If you are not supporting a spouse or another child, up to 60% of your disposable earnings can be garnished to pay child support.
- If you are supporting a spouse or another child, up to 50% of your disposable earnings can be garnished to pay child support.
An additional 5% can be garnished for support payments that are over 12 weeks late. This is called being in “arrears.”
Student Loans in Default
If you are in default on a federal student loan, the US Department of Education or any another organization that is collecting for them can garnish your wages. They DON’T need a court judgment first. This is called an administrative garnishment. The Department of Education can garnish up to 15% of your disposable earnings, but not more than 30 times the federal minimum wage (30 X $7.25 = $217.50)
The federal government can garnish your wages if you owe back taxes. They DON’T need a court judgment first. The amount they can legally garnish depends on how many dependents you have and your deduction rate. State and local governments can also garnish your wages to get unpaid state and local taxes.
- Are there rules on firing employees because they have a wage garnishment?
Yes. Following wage garnishment orders can be a hassle for your employer. Some might prefer to fire you than follow the order. Both federal and state law gives some protection from being fired if you have a garnishment.
Federal and Kentucky law say that your employer can’t fire you if you have 1 wage garnishment. But there are no laws that protect you if you have more than 1 garnishment order.
- What is a bank account garnishment?
A judgment creditor or the debt collector it hires may get a court order (judgment) to try to take money from your bank account to pay the debt. This is a bank account garnishment. Judgment creditors often go after money in bank accounts. They can try to garnish the money in a bank account even if the money originally was exempt (see below). In other words, as soon as you put money into a bank account, a judgment creditor can try to garnish the account if your name is on the account. This includes joint accounts. If you know there is a judgment against you, you may want to close any accounts in your name. By the time you get a notice about the garnishment, it’s probably too late.
- What happens when a bank account is garnished?
When a bank account is garnished the judgment creditor gets an order of non-wage garnishment from the court and serves the bank. The bank freezes the money in all your accounts. Then the bank completes a form saying what accounts have been frozen and sends you a copy. This means you may not find out about it until your money is already frozen. The money in your account is frozen up to the amount of the judgment.
In Kentucky, you have 10 days to object to the garnishment of the bank account. The 10 days runs from the date the bank got the order of non-wage garnishment. This means you actually have less than 10 days. As soon as you get the Order of Non-Wage Garnishment, get Form AOC-150.2, Affidavit to Challenge Garnishment at https://kycourts.gov/Legal-Forms/Legal%20Forms/150.2.pdf and fill it out and file it with the court.
It doesn’t matter whose money it is.
While your account is frozen, any checks you wrote but weren’t yet cashed get returned. You probably are going to get insufficient fund (NSF) charges. Your bank can also charge a fee for the garnishment.
If you do not file the Affidavit to Challenge Garnishment, the bank sends your funds to the judgement creditor.
If you file an Affidavit to Challenge Garnishment with the court within 10 days and claim an exemption, the court sets a hearing for you.
At the hearing, if the court finds that your money is exempt from garnishment (see below), the court orders that the money be given back to you. If the court finds that the money is not exempt, the court orders it to be given to the judgment creditor.
Even if the court finds that the money is exempt from garnishment, you still have to pay for any NSF fees, garnishment fees and other costs associated with the garnishment. The costs of a garnishment can be very large.
If you have a joint account, your creditors DON’T have to tell the other account holder about the garnishment. All the money in the account can be frozen up to the amount of the judgment.