Like every other state in America, Indiana has millions of debtors. The downfall of the American real estate market, the past crash of the stock market, the desire of the American middle class for abundance which it cannot afford, or something else, like uncertainty in the world economy or the US election – all might be reasons.
Unfortunately, many forces bring about past due debt, from inability to pay taxes, to delinquent child support payments, to over-extended credit cards. It is estimated that over seven percent of employees in American are having their wages garnished at any one time, most often due to unpaid child support.
No matter what the root cause of the debt, the end result can and often is wage garnishment or attachment. Someone is taking your hard-earned money and, potentially, making it impossible for you to pay your essential bills. When that day comes, if it does, failing to deal with it, procrastination, other such avoidance or delaying excuses, no longer matter and usually only make matters worse. Finally, the rubber has hit the proverbial road.
If you reside in the State of Indiana, that means you are controlled in your potential solutions by a combination of entangled federal and Indiana state garnishment laws. But if you had to put it generally, the state of Indiana abides generally by the federal laws on wage garnishment and attachment in most areas, while still offering a host of alternative, unique solutions, or aspects in other areas that control over the federal laws.
The devil of course, is always in the details.
Indiana Wage Garnishment Defined
There is a legal definition of wage garnishment, but it is highly technical and perhaps does not express the common sense core of what it means. In lay terms, it means someone is taking your hard-earned money. More literally, more legally, it means someone to whom you owe money (a creditor) has obtained a legal order against you that forces your employer to take part of your pay check and pay it directly to the creditor rather than as usual to you.
In other words, if your last take-home pay was for $444 weekly, your current take-home pay after wage attachment may be for $340 weekly. The difference could be what you owe in rent or your utility bills or even gas for your car. It is understandable, then, that wage garnishment is an involuntary process always resisted (at least emotionally) by the employee-debtor, with the potential for great current hardship regardless of the reasons for its existence.
When Indiana Does Not Require a Money Judgment to Obtain a Wage Garnishment Order
In all states, including Indiana, there are certain situations where the creditor need not first obtain a judgment for a specific amount of money due before garnishing or attaching wages. These situations are called exemptions to the general law. Some of the exemptions that do not require a monetary judgment for the collection of money against you include child support or spousal/alimony support that is overdue; governmental monies owed by you to the state of Indiana, whether fines or penalties for such things as sales tax, withholding or otherwise; student loans that have fallen into arrears; and of course taxes, whether income, sales or otherwise, and whether federal, state, or local.
Human Resources Compliance with Wage Garnishment Orders
In most companies, the business department generally assigned the responsibility of complying with wage garnishment or earnings attachment orders is the Human Resources Department. This Department must be informed of and conversant in the myriad nuances of employee wage garnishment or attachment law.
It can be quite complicated. For example, compare these two legal regimens that govern employers in the state of Indiana: IN Stat. Sec. 31-16-15-0.5et seq. (garnishments for child and spousal support) with garnishments for other kinds of debts (IN Stat. Sec. 24-4.5-5-104 et seq.). In fact, at least initially, most employers first involve their inside or outside legal departments familiar with federal and state employment and garnishment laws.
In Indiana, the process begins with the employer being delivered an order directing it to withhold income for a named, specified employee. This order will identify itself as a wage garnishment order and will typically provide that the employer must withhold a certain amount from that employee’s pay check. If child support is involved, it will set forth the employee’s ongoing obligation for child support, whatever is overdue, and allow for an discretionary charge of $2 for costs related to the bureaucracy costs of compliance.
In the case of child support garnishment, after analyzing and interpreting the earnings withholding order, the Human Resources department does not send the withheld money to the spouse creditor, as it might in some states. In Indiana, the unique system in place is for the employer to remit the money withheld to a child and spousal support collection agency run by an office of the state of Indiana. This agency monitors a variety of details, including the creditor’s name, whatever case number the matter has been assigned, the employee’s social security number, and the ISETS number (meaning: Indiana Support Enforcement Tracking System Number).
This is not a one-time obligation. The withholding order is deemed ongoing, and the order expressly so states, until such time as the employer is informed otherwise.
Restrictions on Wage Garnishments in the State of Indiana
It has long been the policy that the federal government wants to ensure, to the extent reasonably practicable, that families are not deprived of their ability to survive and pay their basic bills. Federal and Indiana state lawmakers want to ensure that families, especially for such things as unplanned health care expenses and things out of their control in an unpredictable economy, are not tossed to the streets. Indeed, if that does happen, the burden will only fall on the feet of one or more state agencies in any case.
In avoidance of this hardship to either the wage earner or the state coffers, the rule of law in Indiana imposes a certain modicum of protection to the wage-earning employee from overextending and over-aggressive wage attachment processes. To do so, it buffers the extent to which your pay check may be assaulted, imposing caps on how much of your wages a creditor may involuntarily reach on any given pay check.
The max attachable changes, following the nuances of the federal law. As a rule, Indiana puts an attachment cap at 25% of your “disposable wages,” as that phrase is defined by federal law, or those covered wages that exceed “30 times the current federal minimum wage,” whichever is less. As of 07-09, federal minimum wage has remained fixed at the hourly rate of $7.25.
Often this is referenced as the “25-30” rule.
Special Treatment for Child Support and Alimony Derives from Federal Law
As discussed above, the state of Indiana handles debts for child and spousal support differently than other debts, including past due taxes as well as such obligations as health care, credit cards and student borrowings.
Preliminarily, for over 30 years, every order in the land for child or spousal maintenance has included an inherent clause for wage attachment or garnishment. Such a clause is per force included in any child support order, even though no wage garnishment is requested. In other words, it just comes with the territory.
The aforesaid “25-30 rule” is thus overridden by garnishments based upon child and spousal support. An alternative set of priorities takes hold instead, providing the obligated spouse with far less protection from garnishment. Accordingly, if and when child and spousal maintenance are invoked, the attachment limit rises to sixty percent of obligated spouse’s pay check (after appropriate deductions). That leaves the indebted spouse only 40% of his take-home earnings.
Every once in awhile, a spouse is saddled with more than one support obligation. This triggers a new set of priorities. If the debtor spouse is also supporting another child or spouse, the amount that can be garnished rises to 50 percent, protecting only half of the debtor’s wages provided he or she is current. If the indebted spouse is in arrears for in excess of 12 weeks, another five percent may be tacked on.
Therefore, in an extreme scenario, child and spousal support can reach as much as 65 percent of an indebted spouse’s earning for purposes of garnishment-based attachment.
Debts Receiving Unusual Treatment
Some debts qualify for unusual treatment under Indiana law. Herewith some illustrations:
- An incredibly high cap of 90 percent can be allowed for bankruptcy proceedings. Many factors weigh in on this potential.
- The IRS can reach as high as 70% of take-home earnings, under an analysis involving many factors. That cap can be lowered by appropriate considerations of “hardship” to the debtor and his family.
There are other exceptions as well.
Garnishments Warranting Priority Consideration
Some debtors get saddled, for whatever reason, with multiple garnishment attachment orders that occur simultaneously. Unexpected health care costs not covered by insurance, emergency private debts, taxes unanticipated for whatever reason, or child support that simply cannot be paid – put thousands of debtors into this category and, thus, put their employers to special considerations and burdens in applying hierarchical garnishment rules.
As a matter of course, the following levels of priority come into play: first, past due child support; second, debts based on unpaid federal income taxes, including of course the heart-beating IRS levies; third, past due or delinquent student loans; and fourth, debts drawn into bankruptcy and reorganization proceedings. Every one of these per force of logic supersedes all other private debts, from personal loans to health care expenses.
For employers the wage attachment process is a burden. If the employer had his or its choice, it would not have to address the super-minutia of wage attachment considerations and fill out the concurrent forms involved. Consequently, some Human Resources officials would just prefer to terminate the aggrieved employee and be done with it. Federal and Indiana law, however, make this action illegal. So compliance with the garnishment order is your mandate.
In conclusion, Indiana wage attachment or garnishment law like all other states is fraught with complications. You are behooved to consult qualified professionals – tax specialists, bankruptcy specialists, CPAs and/or attorneys – to walk you through what is often a mind field of rules and exceptions thereto.
Child Support: IN Stat. Sec. 31-16-15-0.5 et seq.
Debts Other Than Child Support: IN Stat. Sec. 24-4.5-5-104 et seq.
Wage Garnishments: Indiana Code Title 24. Trade Regulation IN CODE Section 24-4.5-5-105; http://codes.findlaw.com/in/title-24-trade-regulation/in-code-sect-24-4-5-5-105.html#sthash.E1sMi3Ao.dpuf
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