Wage garnishment is commonplace across America. One of the largest studies ever conducted, looking at 13 million employees all over 15 years of age, found that 10% had experienced a wage garnishment, half of which were for child support. With over one million adults in the State of New Hampshire, that means over 10,000 people are likely to be suffering some form of wage garnishment at any given point in time. If you are or become one of this unfortunate minority, you will want to know the ins and outs of the garnishment process, beginning with what garnishment actually is.
What Is Wage Garnishment in New Hampshire?
Black’s law dictionary is the official definer of general legal terminology and has been so for over 100 years. It defines garnishment in the phraseology of the old English common law writs, as follows: “A warning to a person in whose hands the effects of another are attached not to pay the money or deliver to the property of the defendant in bis hands to him, but to appear and answer the plaintiff’s suit."
Hard to believe our laws started that obscurely, but what Drake (the author) was saying now converts to an order from the government (usually a judge) telling the person in possession of property to turn it over to the creditor rather than the owner. In the context of wages, that means the order tells the employer to withhold an employee’s wages and pay the withheld portion over to the creditor or his attorney. Only what’s leftover is paid to the employee/debtor.
Wage Garnishment Orders Only Affect Employees
As the world becomes more connected, every year more and more people are working as freelancers or independent contractors. One of the advantages of fitting into this classification, in addition to flexible work hours, is that their earnings generally speaking cannot be garnished, because they don’t technically receive any wages as the term ‘wages’ is defined under federal and New Hampshire wage garnishment law. This is because, technically, there is no employer as such. A wage garnishment order serviced on a freelancer’s contracting client will thus be returned unsatisfied.
For What Kind of Debts Can a Wage Garnishment Order be Issued?
A wage garnishment order can be issued for most any kind of debt. Generally speaking, however, debts will fall into one of four broad categories:
- Basic “consumer debts" such as credit cards, retail store purchases, hospital and medical expenses, and work provided by a building contractor or freelancer;
- Child support and spousal support or alimony, which can be further broken down into ongoing monthly obligations that are not past due and those that are in arrears and are past-due;
- Unpaid taxes at the federal, state and local level; and
- Student loans, which can be broken into those administered by the Department of Education and those that are not.
The category of debt has important implications for the wage garnishment process, as discussed below.
What is the Process for Obtaining a Wage Garnishment Order in New Hampshire?
There are two ways, generally speaking, by which a creditor can obtain a wage garnishment order, and the distinction is critical for the debtor. For all consumer loans, the creditor or collection agency where one is involved, must file and serve a lawsuit on the debtor (more or less like any other lawsuit). This lawsuit must set forth the amount of the debt due with certainty and allege facts showing the debt or part of it has not been paid in a timely fashion, i.e., that a specific amount of the debt is in arrears.
Once served, the debtor can defend against the lawsuit in any number of ways, such as contesting the amount claimed to be owed, denying that the debt is in default in the first place (e.g., a prior repayment deal may have been made), or asserting that the statute of limitations has run. In New Hampshire, the time for bringing most unpaid debt claims is three years from the last delinquency, though for some debts it is six years. This time frame is tolled (extended), however, if any payments have been made, in which case the S/L begins to run anew from the date of last payment.
Money Judgments Are Not Always Required
The typical route to for creditors to obtain a garnishment order is to first obtain a money judgement. Debts that typically travel this path are those arising from the aforesaid category of credit cards, uninsured medical expenses, unpaid utilities, retail installment debts, and the like. Certain creditors, however, need not jump through the hoop of filing a lawsuit. Taxes, child support, and educational loans can be enforced by garnishment without the necessity of the creditor filing a new lawsuit.
Taxes and school loans can be enforced through administrative garnishment orders and the family law judge can order the attachment of wages through a child support withholding order. If fact, since 1988 all child support orders automatically include a wage withholding order that is served on the employer when issued. While certain defenses can be raised, the statute of limitations (most common for consumer debts) is largely unavailable for all of these non-consumer debts.
How Much of My Wages Can be Garnished?
The garnishment process is not always so kind. When bank accounts are garnished, for example, the creditor can usually take all of what it finds there. But that is not the case for most wage garnishments. Wage garnishments are limited by both federal and state New Hampshire law, thus mitigating the harshness of the process.
All consumer debts are subject to the limits imposed by the federal Consumer Credit Protection Act (CCPA). Under the Act, there is something called “the 25-30 Rule," which establishes a maximum that can be garnished in relation to disposable income, as follows:
- Disposable Income: Under the CCPA, disposable income is defined as the net wages to be paid the employee-debtor after deduction for certain things. These things are generally as follows: federal income tax withholding, social security, worker’s compensation, unemployment insurance, and certain (not all) pension and insurance payments.
- The 25 Rule: Under this Rule, a creditor cannot garnish more than 25% of the employee’s disposable income during any one pay period (often every two weeks). So if the employee’s disposable income is $1000, a maximum of $250 can be garnished, meaning the creditor will withhold that amount from the paycheck and pay over the balance, i.e., $750, to the employee.
- The 30 Rule: Under this Rule, the creditor can only garnish the amount of disposable income that exceeds 30 times the federal minimum wage. Since the current federal minimum wage is $217.50 for most workers, only the amounts above $217.50 would be garnishable. At $1000, that would be $782.50.
- Whichever is less: For the benefit of the employee-debtor, the creditor can only garnish the lesser of the two formulas. In the scenario above, that would be $250 as calculated by the 25 Rule.
New Hampshire State Law:
New Hampshire provides a peculiar protection for its working debtors. On the one hand, it only protects disposable earnings that are greater than 50 times the federal minimum wage, or $362.50. This obviously provides more protection than the 30 Rule, which is why it was enacted, and in some situations even more than the federal 25 Rule.
But the “big" protection comes from something else. In New Hampshire, wage garnishment is not continuous. A new order must be obtained for each paycheck, meaning a new lawsuit must be filed or new order applied for each time, which when attorneys are involved can be very expensive. This serves as a deterrent causing many New Hampshire creditors not to pursue the expensive garnishment process in the first place.
By contrast, in states without this protection, the garnishment continues until paid based on a single lawsuit and single garnishment order. In other words, it does not have to be renewed each time.
Exemptions and Non-Exemptions for Wage Garnishment in New Hampshire
Not all debts are created equal, and not all income in New Hampshire is subject to the same garnishment protections. Certain types of income are partially and wholly exempt from the wage garnishment process. Here are a few of the more common exemption scenarios:
- Federal law exempts social security for garnishment for all debts except child support, spousal support or alimony, federal income taxes, and a few other federally-related debts.
- Federal law protects federal pensions, but only from direct garnishment from the government itself. Once the money reaches the employee’s bank account, it is fair game for a creditor with the correct legal garnishment order (which of course must be newly obtained for each new pension payment, making it very difficult for creditors).
- Though offering its citizens fewer additional exemptions than most states, New Hampshire exempts from garnishment the wages of state employees, policemen, fire fighters, and federal employee pensions. But it does not reach private retirement plans, 401(k)s or IRAs.
- New Hampshire law also exempts certain public benefits from garnishment, though they might not technically be considered wages. These are worker’s compensation benefits, unemployment insurance benefits, aid to families with dependent children, and certain individuals with disabilities.
As to all these exemptions, there may also be exceptions where the exemption does not apply. For example, a child support order can be used to garnish unemployment insurance benefits and other exempt sources of income, as the public policy of protecting the children overrides the public policy of protecting debtors from overly aggressive debt collection practices.
Special Protections for Bankruptcy Debtors and IRS Tax Debts
Since bankruptcy procedures are governed by federal law, the decisions of a bankruptcy judge usually trump the protections given to employee-debtors by the CCPA. Under both straight bankruptcies (Chapter 7) and Chapter reorganizations (Chapter 11 and 13), the bankruptcy judge can order garnishment of as much as 90% of the employee’s disposable wages, though this is unlikely. Though not as Draconian, the Internal Revenue Service can order garnishment of as much as 70% of disposable wages through application of a rather complicated IRS formula. However, in both scenarios, garnishments that encroach on necessary living expenses are rarely issued.
More Than One Garnishment Order in New Hampshire
Garnishment orders are ranked by priority that is set by law. Neither the employer nor the employee can decide of their own discretion who gets paid first and who gets paid last. Subject to federal law and Constitutional limits, the following priority of debts must normally be followed:
- Past due child support, spousal support or alimony;
- Past due federal, state, and local taxes;
- Student loans that are in default; and
- Past due debts owed to consumer lenders.
Job Protection for the Debtor Whose Wages Are Garnished
Complying with wage garnishment orders can be time-consuming and annoying, so some employers might feel it is just easier to let the employee go than deal with the hassle. That practice has been made illegal under federal law, which protects employees from termination for a single garnishment order. However, that protection is lost for more than one garnishment.
Checking with Professional
Every debtor’s situation is unique, but dealing with a collection matter can be complicated and challenging, especially when something so intrusive as a wage garnishment order might be involved…and it is potentially involved anytime a creditor files suit or an employee falls behind in taxes, child support or payment of student loans. In those unfortunate circumstances, it is always best for the debtor to consult qualified assistance from debt collection attorneys or other professionals who are in a position to provide the debtor sound advice and peace of mind.
New Hampshire Law
Revised Statutes on Garnishment: https://law.justia.com/codes/new-hampshire/2014/title-xxiii/chapter-282-a/section-282-a-152-a
Contracts and open accounts: RSA 508:4 (3 years)
Notes, Negotiable Instruments: RSA 382-A: 3-118 (6 years)
Judgments, Contracts under seal: RSA 508:5 (20 years)
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