Arkansas follows the lead of many states by the adopting the general protections offered by federal wage garnishment law, except in certain areas of particular importance to the state. This addition protection is provided to laborers and mechanics whose traditional take-home pay is lower than other earning sectors of the state economy. To understand how it all plays out, let’s look at the specifics of Arkansas wage garnishment law.
The Nitty Gritty of Wage Garnishment
Wage garnishment as a general principle is the process whereby a creditor satisfies a money judgement against a working debtor by taking the debtor’s wages directly from the employer. Rather than printing up a full paycheck or directly depositing the full pay check into the debtor’s bank account, the employer peels off a portion and pays it directly to the creditor or the creditor’s attorney. The result is that the employee receives only part of his take-home pay because a chunk has already gone directly to satisfy the debt to the creditor.
Typical Kinds of Creditors
There are different kinds of creditors and these different kinds can be grouped into categories that determine how the garnishment against the employee/debtor is legally obtained.
- The largest group of creditors are the unsecured consumer credit lenders that include the retail credit card companies, doctor and hospital bills, and the like.
- Federal and state tax authorities are also very common, whether it be unpaid federal income tax, past due state income tax, state sales tax, or otherwise.
- Also commonplace are child and spousal support orders which when issued are automatically sent to the paying spouse’s employer.
- And finally there are unpaid student loans.
How Garnishment Orders Are Obtained in Arkansas
A creditor cannot just pick up a mobile, call the employer and tell accounting office to slice off a part of a debtor/employee’s pay check and pay it over to satisfy a debt, even if it is emotionally demanded child or spousal support. Garnishment orders always require some form of legal sanction and the form is determined by the kind of debt involved.
Consumer debt creditors all must go to court first and file a collection lawsuit, serve it on the debtor, and prove the debt owed with valid, admissible evidence. Though the debtor often defaults, it is at this juncture that defenses can be raised – e.g., that the debt has been been, the amount sought is illegal or incorrect, or the statute of limitations has run. If these defenses fail, in whole or in part, the creditor will then obtain a money judgment (and wage garnishment order) issued by the judge.
Tax garnishment orders are quite different in that they are issued by the IRS without the same opportunity for the employee/debtor to contest the actions taken. The number of dependents and hardship will be considered and repayment plans are routinely offered.
Child and Spousal Support
Child and spousal support orders come from the family law judge and are served automatically on the paying spouse’s employer.
Wage garnishment order for unpaid student loans are issued by an administrative law judge and no civil collection action need be filed.
Limitation on Amounts Garnished – Federal Law
A judge, tax authority or administrator cannot order the employer to pay over the employee/debtor’s entire paycheck to the creditor, even if the creditor were to demand it. Federal law places strict limits on how much can be garnished from an employee’s paycheck and the individual 50 states, including Arkansas, are permitted to impose even greater (but never fewer) protections. The reason for this is that taking the debtor’s entire paycheck would cause him/her/the family undue hardship and often make him/her a ward of and financial burden on the state.
The limit imposed by federal law is called “the 25-30 Rule." Under this Rule, no more than 25% of the debtor/employee’s “disposable wages" can be garnished. “Disposable wages" is a technical term defined under the federal Consumer Credit Protection Act, but generally means the amount of wages left over after deductions for social security or SSI, disability, taxes, unemployment insurance, worker’s compensation, and certain pension and insurance payments.
For example, if the worker takes home a gross $1000 per week after qualified deductions, under the 25% side of the rule, the most that can be garnished is $250 per week.
The 30 portion of the Rule provides an alternative method for arriving at cap on the maximum amount that can be garnished. This rule provides that no more than 30 times federal minimum wage can be garnished for any one paycheck. And the way it works is that the creditor is only entitled to the lesser of the two rules, thereby allowing the employee/debtor to take home the greater of the two sums, whatever they may be.
The current federal minimum wage is $7.25 per hour, and 30 times that amount is $217.50. Applying this to our example above, the 30 side of the 25-30 Rule would limit the garnished wages to $1000 – $217.50 per week = $782.5. Since $250 (25% of $1000) is less, that is the most that the creditor can garnish for any one paycheck.
Variations from the Federal Rules – Arkansas Law
The state of Arkansas has exercised its right to provide greater wage garnishment protection for its laborers and mechanics, who traditionally earn wages at the lower end of the wage scale. Under Arkansas law, the first 60 days wages are fully 100% exempt, and then after that time the most that can be garnished is $25 per week or the lesser of the federal “25-30" rule.
Unpaid Student Loans Are Treated Uniquely
Certain educational loans are serviced under the Higher Education Act. If these loans go into default, the Department of Education or government-approved guaranty agency will send out a 30-day notice in the form of a letter, offering the debtor an opportunity to cure the default or request a hearing to contest the threatened garnishment. If no hearing is requested, an administrative garnishment order will be issued to the debtor’s employer for 15% of the debtor’s disposable earnings but never no more than 30 times minimum wage.
Special Rules Apply to Child Support Orders
Since 1988, all child support orders have included what is called an income withholding order, which is essentially a wage garnishment order. An additional order can be obtained if the paying spouse falls behind on any child support ordered to be paid. It is important to note that “the 25-30 Rule" does not apply here. Federal laws permits as much as 50% of disposable earnings to be garnished from the paychecks of spouses who support a spouse or child not benefitting from the garnishment. This amount increases to 60% where the paying spouse does not support any spouse or children. And another 5% can be tacked on to either, bringing the percentages to 55% and 65% for child support arrearages that are older than 12 weeks.
Garnishments for Unpaid Taxes
If your federal taxes go unpaid, the federal government can garnish your wages under a formula that considers your filing status, the number of dependents you support and the hardship that would be imposed upon you. Under this formula, as an example, a single adult with no dependants who makes $500 in disposable earnings per week can have no more than $269 per week garnished, which is just over 53%. The federal government has published a chart which provides the specific amounts that can be garnished.
Multiple Garnishments in Arkansas
Sometimes working debtors are subject to more than one garnishment order. In that case, with the exception of unpaid federal taxes and child support arrearages, the total amount that can be garnished is subject to “the 25-30 Rule." For example, if the Department of Education is garnishing 15% of a debtor’s wages, a private creditor will be limited to 10%.
Job Security Protections in Arkansas
Federal law prohibits Arkansas employers from terminating an employee whose wages are subject to a garnishment order. Though federal law only protects employees with a single garnishment order, Arkansas state law provides additional protection to noncustodial parents who are subject to a child support withholding order, even if other garnishment orders have been issued for other debts. The policy is to protect working parents with the need to pay child support.
As illustrated above, wage garnishment issues can arrive in many forms. All of them – whether 30-day letter, service of a complaint, or demand for arrearages to be paid – should be dealt with diligently, in detail, and correctly. Because the terrain of wage garnishment can be complicated and tricky, hiring a qualified debt attorney or professional is often a wise decision so that rights and opportunities are preserved and peace of mind is ensured.
Ark. Code Ann. §16-66-208 (greater wage garnishment protections for laborers and mechanics)
Arkansas Department of Labor website: labor.ar.gov.
Consumer Credit Protection Act: https://www.govinfo.gov/content/pkg/USCODE-2009-title15/html/USCODE-2009-title15-chap41.htm
Federal Garnishment FAQ Sheet: http://www.dol.gov/whd/regs/compliance/whdfs30.pdf
Higher Education Act Loans: 20 U.S.C. § 1095a; 34 C.F.R. § 682.410(b)(9)
Office of Child Support Enforcement: https://www.acf.hhs.gov/css/resource/processing-an-income-withholding-order-or-notice
Bankruptcy and Wage Garnishment: https://search.uscourts.gov/search?affiliate=uscourts.gov&locale=en&query=wage%20garnishment