The garnishment process provides creditors with a way to collect unpaid bills. When debts such as credit cards, medical expenses, federal and state taxes, school loans, and child support or alimony go into arrears, creditors can attach wages or go after property.
When attaching wages, however, the garnishment process is governed by federal and state laws designed to protect debtors from overreaching and excessive attachment. Since the federal laws provide significant protection to all Americans, Georgia has opted to embrace those laws for the protection of debtors living in that state.
With creditors, employers and debtors all having rights and obligations in the wage garnishment process, let’s examine the details more closely.
Commencing the Wage Garnishment Process
For all sorts of reasons, people fall behind in their debts. When they do, the late notices start arriving, and before they know it, a collection agency is calling and dunning them. When its patience finally runs out, the creditor often hires a lawyer to file a debt collection lawsuit. Rather than stick their heads in the sand, that’s the time for all debtors to examine the details carefully and respond diligently before important rights are lost.
In the universe of delinquent debts, there are three categories of potential “affirmative defenses" that may be raised by the debtor when served with a debt collection lawsuit. These “affirmative defenses" may be described as follows:
- The debt is time-barred, i.e., the creditor has waited too long to sue and now is barred from doing so even if the debt is owed;
- The debt sued upon is exempted from wage garnishment under federal law; or
- The debt has already been paid or is already the subject of a negotiated repayment plan (sometimes the tail doesn’t know what the head is doing.)
The statutes of limitations vary widely from state-to-state, so if you are new to a state, don’t assume the old statute applies. In Georgia, debts based on a written contract are generally subject to a six-year statute of limitations. This includes most debts to which wage garnishment are applied.
Wage Garnishment Orders in Georgia
Even when contested, most debt collection actions result in a money judgement being entered for the creditor for the unpaid debt, plus interest and penalties. With judgment in hand, the creditor can immediately ask the Court to issue a wage garnishment order. Once issued, the wage garnishment order will be served on the debtor’s employer. The employer must then discharge its obligation to garnish the debtor’s wages and pay the garnished portion over to the creditor or designated government collection unit. In doing so, the creditor must be careful to comply, not only with the court order, but any applicable federal or state laws exempting wages from attachment or limiting the amount that can be attached.
Only True Employee Wages Can be Attached
Georgia like the rest of America has undergone a huge transformation in its labor force over the last decade. Today, more workers than ever before are freelancers working from home or independent contractors doing work on a project-by-project basis. None of these people, technically speaking, are earning an attachable paycheck under federal or Georgia wage and hour law. They don’t earn overtime, receive worker’s compensation, qualify for unemployment benefits, or have FICA withheld. If a company receives a wage garnishment order for such a person, the order must be returned unpaid for lack of a garnishable wage.
Wage Garnishment without Exemptions and Protections
In the absence of exemptions and protections for the collection of debts, the first creditor to walk through the employer’s door with a money judgement would be able to garnish all of the debtor-employee’s wages. It wouldn’t matter that overly aggressive creditors could render the debtor penniless, with no way to pay living expenses for himself and his family, and that the family would fall onto the public dole. Accordingly, Congress has passed federal laws that exempt and limit what wages can be garnished.
Debts Exempt from Wage Garnishment
Unlike some states, Georgia relies solely on federal law for exemptions from the wage garnishment process. While states like Wyoming exempt almost all private and public pensions from attachment, Georgia does not do so because federal law does not do so. Under federal law, only social security payments cannot be garnished, so as to protect the security of retirees. But even then, there are carve-outs for past due federal income taxes, child support, and alimony or spousal support, for which social security benefits can still be attached.
The Protections of Federal Law
The federal Consumer Credit Protection Act, as applied in Georgia, puts a lid on how much of an employee’s wages can be garnished. Referred to as the “the 25-30 rule," the limitations are as follows:
- Under the 25% portion of the rule, no more than 25% of the employee’s “disposable wages" can be subject to wage garnishment during any one pay period, assuring that 75% of the employee’s wages are made available to the employee-debtor for living expenses.
- Under the 30% portion of the rule, a creditor cannot garnish any wages (even if it’s part of the 25%) until after thirty times federal minimum wage is exceeded. If any wages are remaining after that, that portion can be fully garnished.
These rules must be applied in the way that maximizes the wages taken home by the debtor-employee. In the event that one rule protects more wages than the other, the greatest protection possible is afforded the debtor-employee.
“Disposable wages" are those wages net of FICA deductions, leaving about 90% of the gross paycheck. In other words, as a practical matter, the 25% and 30% rules are applied to only 90% of the employee’s net paycheck, leaving the rest to him and his family.
Bankruptcies and Federal Tax Debts
Bankruptcies and unpaid federal income taxes are not subject to “the 25-30 rule." When either one is involved, a standard 50% rule typically applies, meaning half of the debtor’s disposable wages may be garnished (note this amount can be exceeded). This is always subject, however, to considerations of “hardship" so as to ensure the employee takes home enough to pay essential living expenses.
Prioritizing Multiple Garnishment Orders
Many debtors who have fallen on hard times are subject to multiple wage garnishment orders. When applying “the 25-30 rule," it does not matter how many garnishment orders there are. Only 25% of wages can be garnished, never to encroach upon any amount within the ambit of 30 times federal minimum wage. But for whom does the employer garnish the wages, is the question, as it’s not “first in time, first in right" for priority debts.
When complying with a wage garnishment order, the employer must follow a certain order of priority regardless of which order arrived first:
- Child support and alimony,
- Federal, state, and local taxes,
- Student loans, and
- Private consumer debts, which are paid on a first-come, first-serve basis.
Applying federal and state garnishment laws can be complicated. Unless you’re dealing with a small debt that can be paid in one or several installments, it is wise to consult a professional with an expertise in creditor-debtor law and the garnishment process, such as an attorney or CPA. These professionals are more likely to be able to give you the peace of mind you need.
OGCA § 18-4-4 (2016), Georgia Garnishment Law
OCGA 9-3-24, Georgia Statute of Limitations
OCGA 34-7-2, Frequency and Manner of Wage Payments
Public Law 99-150, enacted on November 13, 1985, amending the Fair Labor Standards Act
Title II of the Consumer Credit Protection Act, 15 U.S.C. Section 1671 to 1777 – applies to all garnishment orders
What Georgia Employers Need to Know, http://sos.ga.gov/index.php/corporations/what_georgia_employers_need_to_know
Georgia Legal Aid, Garnishment Exemptions, https://www.georgialegalaid.org/files/6FCBD72D-B465-109D-9EC1-5A4F52A74EE9/attachments/86C3F728-398F-4072-8FAB-B98E246D5FB6/garnishment-exemptions-available-in-georgia.pdf