Like every state, Nebraska has thousands of individuals who have fallen behind in paying their credit cards, taxes, student loans, and child/spousal support. In these situations, creditors have the legal right – and many the desire – to satisfy the debts owed by garnishing the wages of debtors with active jobs. There are limits, however, to how much wages can be garnished, and there are actions that debtors can take to defend against and mitigate the hardship of these collection proceedings. Let’s explore the law of garnishment in Nebraska and see how it works.
What is a garnishment?
Garnishment is the attaching of another’s money or property before it can be paid over or returned to the owner. Garnishments generally are available to satisfy any money judgement or lawfully issued government order. Bank accounts, savings accounts, various monetary funds, and wages – all can be reached by a garnishment order.
What is a wage garnishment?
A wage garnishment (or in Nebraska, “wage withholding") is that specific form of garnishment that insinuates itself directly into the employer-employee relationship. It takes place when the creditor or its attorney serves a wage garnishment order on the employer, instructing the employer to withhold the employee-debtor’s wages. By “withholding" is meant the employer deducts the garnishment amount from the employee’s paycheck or direct pay arrangement and pays over the withheld portion directly to the creditor.
What types of creditors can obtain wage garnishment orders in Nebraska?
Any creditor can obtain a wage garnishment order, but they tend fall into one of the following categories:
- Consumer lenders which includes credit card companies, retail stores, Amazon and online purchases, medical and hospital bills, and the like
- Taxes (and government fees) from any government entity – federal, state, county, local
- Child support and alimony (which is spousal maintenance), which further breaks down into currently due and past due
- Educational loans administered by the Department of Education or guaranteed by the government
How does the creditor obtain a wage garnishment order in Nebraska?
There are several ways a creditor can obtain a wage garnishment or withholding order depending on the type of creditor involved.
Money Judgements: To obtain a wage garnishment order, a consumer lender must first file a lawsuit alleging that a sum certain is due, owing, and unpaid. That lawsuit must be served on the debtor with a summons like any other lawsuit, thereby giving the debtor an opportunity to hire a lawyer, defend the action, and raise certain affirmative defenses.
Administrative Orders: Federal and state tax authorities do not have to file a lawsuit to initiate the process of obtaining a wage garnishment order. All they have to do is send the notices required by the applicable regulations and, if the debt isn’t paid or a payment arrangement agreed to, the order will be issued perfunctorily, as a matter of course. Any applicable defenses must be raised informally at this stage.
Child Support Orders: Child support orders are a different beast altogether. Since 1988, all states in America have been required to include child support withholding orders as part of the order for child support. So these orders issue as an integral part of the family law process and must be addressed at that time.
What defenses can be against a requested wage garnishment order in Nebraska?
In consumer debt cases where the creditor must file and serve a lawsuit, the debtor must proceed with haste and either hire an attorney or represent himself by filing an Answer to the complaint. In this Answer, the debtor typically has four types of defenses that can be raised (and that will ultimately have to be proven with admissible legal evidence):
- That the debt or some part of it has been paid;
- That the debt or some part of it is illegal and in violation of federal or state law (such as the imposition of usurious interest or fees far in excess of the underlying debt itself, in which case a counterclaim might also be filed);
- That the debt in question is subject to a prior repayment agreement with which the debtor has been complying (or which the debtor has breached by some action or inaction); and
- That the statue of limitations bars the debt from being collected because the creditor has waited too long to bring the claim (for most consumer debts in Nebraska, that time period is either five years or four years depending on whether the debt stems from a written instrument).
Defenses can also be raised to taxes, child support, and defaulted student loans, but these are all peculiar to the process. The most important rule is for the debtor to act promptly to ascertain what he or she must do to raise, preserve, and prove any defenses that might be asserted, as well as possibly work out a repayment arrangement.
Are there any limitations to wage garnishments in Nebraska?
There are, and these derive from both federal and state law. At the federal level, the Consumer Credit Protection Act limits the amount of wages that can be garnished from any one paycheck or direct deposit. The rule that’s applied is commonly called “the 25-30 Rule," which works as follows so as to protect the take home pay of the worker:
The 25 Rule: This rule limits the garnishment to 25% of the debtor-employee’s “Disposable Income." For example, if the Disposable Income for two week’s pay is $1000, the most that can be garnished for consumer debts is $500.
Disposable Income: Disposable Income is generally defined as that part of the paycheck that remains after deduction for taxes, worker’s compensation, unemployment insurance, social security or SSI, and certain private pension amounts.
The 30 Rule: This rule is alternative to he 25 Rule. It flatly protects all wages up to 30 times minimum wage, which is $7.25 per hour and thus equals $782.50. Any amount above that can be garnished, except it can never violate the 25 Rule.
Most Protection: The debtor-employee gets the advantage of applying the rule that provides the greatest protection.
Head of Household: As a separate measure of protection, the state of Nebraska limits the amount of wages that can be garnished from the head of household to 15% of Disposable earnings. This is usually 10% greater protection than that provided by federal law.
Does the wage garnishment order apply to any income I earn?
It depends on your status. First and foremost, a wage garnishment order only applies to true wages, which means earnings from a regular job where there is a regular paycheck, withholding, UI, Worker’s Comp and a traditional employer-employee relationship. It does not apply to earnings paid to freelancers and independent contracts. If such a client were to receive a wage garnishment order, the hiring contractor would be legally bound to ignore it and would be legally liable for withholding and paying over the freelancer’s money to the creditor.
Are there special situations where the federal and state protections do not apply?
Yes, there are. For unpaid taxes, child support, and student loans, special rules that favor the creditor do apply. The 25, 30, 15 rules otherwise applicable in Nebraska to protect debtor-employees from wage garnishment give way to the federal government’s public policy considerations in these areas.
Under a federal law alternative to the Consumer Credit Protection Act, wage garnishments for ongoing child support obligations can be as high as 50% of Disposable Wages for those debtors who are currently supporting another family (spouse or child or both). But for those debtors without other family support, the amount can go as high as 60% of disposable wages. And on top of that, another 5% can be grabbed to cover support obligations that are over 12 weeks past due (for a total of 55% and 65%, respectively).
Let’s face it, unpaid taxes can be a real thorn, and the lightened protections for debtor-employees from wage garnishment don’t make things any easier. In this arena, the deciding factor is how much it takes for the debtor to pay his/her basic living expenses, which turns on how many dependents the debtor is supporting. The more dependents, the less that can be garnished. Whatever is leftover after the basic necessities, the IRS can grab, though hardship can and is taken into account depending on the circumstances of the particular debtor’s situation.
Non-Tax Federal Debts
All sorts of non-tax debts might be owed to the federal government. If these debts are covered by the federal Debt Collection Improvement Act, the government can only collect up to 15% of Disposable Wages. These debts, however, cannot be given further protection by state laws unlike consumer debts.
Student Loans in Default
It’s hard to comprehend, but 40% of students are expected to be in default of their student loans by 2025 (only six years from now). That amounts to 250,000 new defaults per quarter and one million per year. All of them are subject to wage garnishment, and for those with federal loans, an administrative garnishment (no lawsuit needed) can reach 15% of the debtor’s disposable wages via a garnishment order, not to exceed amounts protected by the 30 Rule.
What happens in Nebraska when there are multiple garnishment orders?
When it rains, it pours, or so the old Morton’s Salt ad goes, the one with the dog pulling the girl’s bathing suit bottoms. But it has deep truth in the world of debt, because loan, tax, and support defaults tend to be associated with life disruptions that create a domino effect. Not to worry, however, because the debts can only be stacked on top of each other to reach garnishment amount allowed by law for any single debt, though there is a priority scheme that goes like this:
- Child support and alimony come first;
- After that, federal and then state income tax arrearages;
- Student loan defaults are third;
- And then all the consumer debts, credit cards, dental and medical bills, what have you, take up the rear on a first come first serve basis.
Are punitive actions by employers permitted?
For employers, a wage garnishment means time, expense and hassle complying with the garnishment and doing the paperwork. For some, the employee might not seem worth the effort and termination would follow. But that is not permitted under federal law as to the first garnishment. If this issue arises, it can be addressed directly to the Nebraska Department of Labor.
What to do if a garnishment order comes down.
As you can see, the rules and regulations governing wage garnishments, protections, exemptions and such can become quite complicated. While hiring a professional is not always necessary, acting with due diligence and understanding what to do and when to do it is absolutely essential. Which means: for peace of mind, always consult with a professional, legal aid, or other knowledgeable person about how to proceed.
Statute of Limitations runs anew from last payment: Neb. Rev. Stat. §25-216
Department of Labor: dol.nebraska.gov/center.cfm?PRICAT=3&SUBCAT=6A
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