Wage garnishment usually occurs when an individual is sued for an unpaid debt and the creditor is granted a writ of garnishment by the court system. This writ of garnishment allows the creditor to claim a portion of the debtor’s paycheck until the debt is repaid. The federal government, however, is not bound by the same legal requirements.
What Can Cause a Federal Wage Garnishment?
Any debts that are owed to the federal government and left unpaid may result in a government garnishment. Some examples of these debts include:
- Unpaid tax debts
- Student loan debts
- FHA deficiency balances
The Federal Government Does Not Need a Writ of Garnishment
Most creditors are required to procure a writ of garnishment from a court system before legally garnishing an individual’s paychecks. The federal government, however, faces no such red tape. As long as the debtor is properly notified of the impending garnishment, no other legal procedures are required.
When an individual faces wage garnishment from a private creditor (See Wage Garnishment and Collections), certain types of income he has are exempt from being garnished. These income restrictions do not apply to the federal government and a debtor may find that income judged exempt by other creditors can be withheld to satisfy a debt. The types of income that can be withheld to repay a federal debt include:
- Wages
- Income tax returns
- Social Security retirement and Social Security Disability
- Veteran’s benefits
- Unemployment
How Much Will the Government Withhold?
The current garnishment law as set by Title III of the Consumer Credit Protection Act does not allow creditors to garnish more than 25% of a worker’s disposable income per pay period. This law, however, does not apply to debts consumers owe to the federal government.
Luckily, the provisions for some debts owed to the government are less than that of debts owed to private creditors. The U.S. Department of Education’s guidelines concerning unpaid student loans, for example, states that unpaid debts will only result in 15% of a consumer’s disposable earnings being withheld.
Tax garnishment, however, is a bit more complicated. Often referred to as a wage levy, the IRS has a set formula it will follow to calculate an individual’s dependents, current income, and disposable income. The IRS may or may not leave any disposable income but will allow the consumer enough money to pay for his or her basic needs until the debt is repaid and the wage levy ends.
Government Garnishment Can Be Avoided
Any individual who owes a debt to the federal government would be wise to attempt to work out a repayment plan before being garnished. In some cases, such as with defaulted student loans, the consumer’s credit history will be rehabilitated as soon as the debt itself is brought current.
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