A garnishment is a legal procedure a creditor uses to collect a debt, usually in the form of wages. A third party, such as an employer, withholds wages from an employee. It allows an individual or creditor to collect money owed by the employee before it even reaches them. While the court order affects the employee’s wages, it is the employer who is responsible for garnishing and remitting the payments. are by a creditor, the individual or entity owed money, to collect a debt.
When a lawsuit has been won against an employee, the terms of the settlement may require that it be paid with money taken directly from that employee’s wages. This withholding of wages, or garnishment — is performed by the employer, and sent directly to either the court or to the individual who won the lawsuit — depending on the decision of the court. The employee’s wages are then garnished until the court-ordered debt has been paid.
For more information on what a garnishment is, watch the video below with certified public accountant and OnPay subject matter expert, Noel Lorenzana:
What are examples of garnishments?
The most common garnishments are divorce and child support settlements, federal debt, state debt, or to repay creditors. Note that child support is typically the highest priority for wage garnishments and may also include alimony. Also, the Department of Education or private loan companies may request payroll garnishments for employees who have defaulted on their student loans. If an employee has multiple garnishments, they must be processed in order of priority.
What does it mean to garnish wages?
When an employer garnishes wages, they withhold an employee’s earnings from a paycheck to fulfill an order from the court or a government agency. Note that any employee who earns wages, salaries, bonuses, commissions, or other types of compensation is eligible for wage garnishment. In addition, wage garnishment is often required to comply with the law and must be implemented until the employer receives a notification to stop. Note that most online payroll software allows you to set garnishment rules and automatically record them on pay stubs.
What is a stay of garnishment?
A stay of garnishment usually applies to employees with Chapter 7 and Chapter 13 bankruptcy cases. It informs employers to stop garnishing their wages immediately. Once you receive a stay of garnishment as an employer, you’ll need to stop withholding wages from an employee’s paycheck. A stay of garnishment provides an employee with some breathing room while they make sense of their finances and make a plan with their bankruptcy attorney.
Using garnishment in a sentence
“Every two weeks, I need to take an $80 garnishment out of my employee’s check and send it to the IRS to pay her back taxes.”
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