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What to do when they garnish your wages

Wage garnishment isn’t the end of the world, but there are ways to soften the debt collector’s blow.


NEW YORK (MainStreet) — With millions of Americans drowning in debt, more creditors (and the Internal Revenue Service) are garnishing wages to get their cash. Human resources gurus say that one wage garnishment is survivable job-wise, but more than that and all bets are off.

Employers are prohibited from letting you go because of a wage garnishment issue, a protection extended under the recent Consumer Credit Protection Act.

But you get only one “get out of garnishment jail free card.” A second garnishment isn’t protected by Uncle Sam, and an employer who views an employee with a second garnishment as a mark on his or her character has every right to fire that employee.

Usually, companies can do so under either a “code of conduct” violation (your garnishments make the employer look bad) or they can let you go if you’re an “at will” employee (meaning you or your employer can terminate the arrangement at any time).

Wage garnishment is most commonly levied by the IRS or via a court ruling. The IRS is particularly tough – it can garnish both your income and, if you’re retired and collecting government benefits, can take 100 percent of your Social Security checks, too. The levy usually isn’t lifted until the debt is paid off in full.

If you’re employed and suffer a wage garnishment, know that the IRS can take up to 65 percent of your paychecks. You do have some options, though, as outlined by the IRS:

READ: 5 reasons you will not get a state tax refund

Pay off the debt. Once that’s done, the garnishment is automatically lifted.

Ask the IRS for a payment plan. Uncle Sam is surprisingly amenable to negotiating a regular monthly payment to erase your debts and avoid the need to garnish your wages at all. As long as you pay the bill every month, there’s no reason for your employer to get involved – which is good for your career, to say the least.

Offer a lower bulk payment as compromise. If you can negotiate a “payoff” sum with the IRS, you can also avoid a wage garnishment. This one’s tricky though, and you’re better off checking in with a tax professional before you climb into the ring with the IRS.

READ: How is a tax refund treated in a divorce?

File for bankruptcy. This option is not recommended, as it can really damage your credit score. But if it’s “last resort” time, bankruptcy can at least help you avoid wage garnishment, or have it released if the garnishment is already in place.

Quit your job and dodge the IRS for a while. If you quit your job, it will probably take the taxman several months to track you down at your new job. They won’t like it, but at least your wages won’t be garnished in your new job (for the short term, anyway). That might buy you some time to work your debts off.

The best way to avoid a wage garnishment may be old-fashioned, but it works all the time. Pay your bills on time, save some money for emergencies (this definitely counts as an one!) and spend less than you earn.

Do that and neither your employer nor the IRS will be dogging you about wage garnishments ever again.

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