Millions of people across America have fallen behind in their child support, tax payments, student loans, credit cards, and medical bills. Unlucky at the dice tables of Las Vegas and Reno, many Nevadans are thus subject to the often-complicated and even harsher wage garnishment process. Protections, exemptions, and defenses can be asserted by the debtor-employee, but these must be presented in a diligent, timely and correct fashion. Let’s take a closer look at the ins and outs of how the wage garnishment process transpires in the gambling state.
What is a wage garnishment in Nevada?
A wage garnishment is a species of the broader concept of garnishment or attachment. Attachment is a traditional debt collection remedy involving the sequestering of someone’s property or money so that it can be paid over to someone else. When applied to wages, it means the debtor’s employer is ordered to withhold the employee’s wages from his or her paycheck or direct deposit and pay it over to the creditor or the creditor’s attorney. Only the amount remaining then goes to the income earner.
Can all income be garnished, regardless of how earned?
The simple answer is all income cannot be garnished. A wage garnishment only applies, as the name denotes, to a source of income that is legally defined as “wages" under federal and Nevada wage and hour law. In this context, wages has a technical definition that refers exclusively to income earned from the employer-employer relationship. As a remedy, a wage garnishment thus cannot be used to sequester the income earned by an independent contractor or freelancer. Any such garnishment order must go unanswered because it is legally inappropriate as applied to that source of income.
What kind of debts can be collected by a wage garnishment order in Nevada?
Every kind and color of debt can be collected through the mechanism of a wage garnishment order. However, these debts can be divided into various categories which determine how much of the employer’s paycheck can be garnished. These categories are as follows:
- Consumer loans such as credit cards, gambling debts, online purchases, medical and hospital expense,
- Child support and alimony,
- Federal income taxes and fees, and
- Student loans.
How is a wage garnishment order obtained in Nevada?
Wage garnishments come from the courts or an administrative agency, depending on what type of debt is involved.
Consumer Debts: Consumer debts such as unpaid credit cards can only be enforced if the creditor first files and serves the debtor with a debt collection lawsuit. The complaint must allege that a specific amount is due and unpaid, and the debtor is then given the opportunity to answer the complaint and raise defenses to it. Only when a money judgement has been obtained against the debtor can the judgment be enforced with a garnishment order.
Child Support: Since 1988, all child support orders have automatically included an ongoing wage withholding order that is served on the paying spouse’s employer and must be honored by the employer until it is revoked by the court or the children involved become adults. Any arguments against the issuance and amount of the order must be raised before the family law judge.
Taxes: There are no state taxes in Nevada but federal income taxes that have fallen into delinquency can be garnished by the IRS without the need for a lawsuit or money judgment. Any objections must be raised in response to the IRS’s statutory letters informing the debtor-employee of the tax being demanded.
Student Loans: Any student loans that fall under the federal Education Act can be garnished through an administrative agency order. Arguments against the issuance of the order must be raised at that time.
Are there any defenses to wage garnishment orders in Nevada?
There are defenses to proceedings where wage garnishment orders are sought, thought the defenses must be asserted in accordance with the rules and paperwork peculiar to the proceeding. All debts are subject defenses claiming that:
a/ the debt has been paid and is not due,
b/ the amount asserted as due is incorrect and is not owed as claimed, and
c/ a prior agreement for repayment has been made.
For consumer debts initiated by a collection lawsuit, the statute of limitations may also be raised, essentially claiming the creditor is time-barred from bringing the action. In Nevada all claims arising from a written contract or arrangement must be brought within six years.
Protections Against Garnishment
Even where the debtor owes the money claimed, the creditor cannot garnish all of the debtor’s wages and leave him or her destitute. Both federal and Nevada state law impose limits on how much of a wage earners’ income can be garnished to pay off debts.
Under the federal Consumer Credit Protection Act, there is something called “the 25-30 Rule." Under the 25 Rule, the creditor can only garnish 25% of the employee-debtor’s “Disposable Earnings."
Disposable earnings are the earning that remain after deduction for federal withholding, social security or SSI, worker’s compensation, unemployment insurance premiums, and certain qualified pensions.
Under the 30 Rule, the creditor cannot attach any part of 30 times minimum wage. Minimum wage is $7.25 per hour and adds up to $217.50 per pay period. Thus anything above that figure would be 100% garnishable unless otherwise protected by the 25 Rule or Nevada state law.
Nevada State Law
Nevada state law provides additional protection for its resident debtors from excessive wage garnishments. While the federal law protects the greater of the 25 Rule or 30 Rule, Nevada law goes one step further by protecting 50 times minimum wage. This figure is $362.50.
The different federal and state garnishment protection formulas result in different amounts theoretically being protected. In this situation, the debtor is entitled to pick from the greatest protection among them. These protections, however, give way to other policy considerations for non-consumer debts.
Special Rules for Child Support, Taxes, and Student Loans
The rule of thumb is that one in ten people in America are having their wages garnished at all times, and half of those people are being garnished for child support. Unlike consumer loans, which are protected from wage garnishment by “the 25-30 Rule," as much as 65% of Disposable Wages can be garnished for child support depending on the debtor’s support status and the age of the debt.
If the debtor is supporting a family (wife or children or both), the most that can be automatically attached is 50% of Disposable Wages. If he/she is behind in support, an additional 5% can be attached for a total of 55%. For paying spouses not supporting a family, the amounts are 60% and 65%.
Delinquent Federal Taxes
One of the great advantages of residing in Nevada is that the gambling state does not impose state income taxes on its citizens. Instead the state and its local principalities are financed mostly through fees paid by casinos and gambling establishments. So there are no delinquent state income taxes as there are for many in other states. However, the federal government can still garnish over 50% of Disposable Wages for delinquent federal taxes depending on the number of dependents that are involved, as set forth in a published federal table.
Many student loans administered by the U.S. Department of Education. If these loans fall into default, an administrative garnishment order can be issued that reaches up to 15% of the debtor’s Disposable Wages.
What happens if there are multiple garnishment orders?
When a debtor is facing down multiple garnishment orders ensure, the total amount that can be garnished is still 25%, except as indicated above for child support, alimony, and taxes. There is, however, a priority between them, which is as followed:
- Child support and alimony, ongoing and past due, come first regardless of when the withholding order was issued and served on the employer,
- Delinquent federal, state and local taxes and fees come next,
- Unpaid student loans follow third in line, and
- Finally consumer debts are paid, with priority amongst them being established by FIFO – first in time, first in right.
Protections Against Adverse Employer Action
It takes time, effort, and hassle to deal with garnishment orders, and small businesses are sometimes inclined to let the garnished employee go to avoid the trouble. Federal law makes such punitive actions illegal for the first garnishment, though protection is not provided against adverse employer actions for multiple garnishments. But Nevada extends this protection to multiple garnishments as well.
Qualified Assistance from Professionals
Navigating the garnishment process can be tricky and complicated. Often it is best to consult with legal aid or hire a professional who is qualified in the field of debtor-creditor rights to help provide peace of mind. But no matter what you do, do not put your head in the sand and avoid it. Acting promptly and diligently is essential to protect your interests.
General Garnishment: https://www.leg.state.nv.us/NRS/NRS-031.html
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