Wage garnishment is a means of extracting payments from a debtor by removing payments directly from any income the debtor receives. Garnishment may be used to pay off debts owed to credit card and financial companies, medical facilities, and child or spousal support. There are some types of income that may be ineligible for garnishment, known as wage garnishment exemptions. These exemptions may vary between jurisdictions, but generally include a minimum amount guaranteed to the debtor for living expenses, as well as income earned through certain types of accounts.
The most common type of wage garnishment exemptions are meant to ensure that a debtor still has enough money to live on. Laws vary by region on exactly what constitutes a livable income; US federal law exempts garnishment on income under 30 times the federal minimum wage. This means that if the federal minimum wage was $10 US Dollars (USD) per hour, weekly wages at or below $300 USD would be considered wage garnishment exemptions. Individual US states, however, frequently have laws that allow different levels of wage garnishment exemptions, which is permitted so long as the federal law takes precedence.
In addition to living wage garnishment exemptions, other forms of income that may be exempt often included state assistance income, such as Social Security or welfare. In some regions, disability, pension, annuity, and death benefit payments are also partially or fully exempt. These exemptions help protect the elderly, disabled, and destitute from being completely at the mercy of creditors. By protecting these sources of income, governments try to ensure that the most vulnerable citizens still receive a livable income.
In many cases, wage garnishment exemptions other than regular income need to be granted through a petition. The debtor must show why he or she deserves the exemption, or else it may be open for garnishment. This type of law helps prevent situations where a person makes enough income from sources such as annuities to pay off debts, but chooses not to for some reason. Each region may have specific laws that detail how a petition for exemption is made; court clerks may also be able to provide debtors with petition materials.
Some types of wage garnishment exemptions apply to worker's compensation, unemployment compensation, and retirement accounts. In some cases, this type of exemption only applies to the accounts before they are paid out to the debtor. If, for instance, a person had an IRA account that had not yet matured, the funds inside the account might be protected from garnishment by law. If the debtor cashed in the account and began taking payouts, the funds might be open to garnishment.