Wage assignment meaning and purpose
A wage assignment is a voluntary or involuntary transfer of earned wages to pay debt, pay back taxes or even pay off student loan debt. Wage assignments may also be used to pay child or spousal support payments. In some instances, a wage assignment allows a lender to take a portion of an employee’s earnings each month to repay a debt without taking them to court first.
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An automatic withholding plan may be set up to pay back various debts, including back taxes, defaults on student loans, and both child and spouse support payments. Wage assignments are built into contracts regarding debt repayment, and allow creditors to receive a portion of an employee’s wages without needing a court order. Wage garnishment orders for private debt (as opposed to child support orders and tax levies) are always signed by a judge. The exception is when private debt is owed to the US government, in which case they are allowed to forgo the judge’s signature.
Involuntary wage assignments are typically referred to as wage garnishments. This type of arrangement usually results from a court order. In either case, the employee’s paycheck will be decreased by the amount of the assignment, and that deduction is noted on their pay stub.
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