Wages Are Garnishable, but Capped

Wages are the income creditors actually reach, and federal law limits how much.

Under Title III of the Consumer Credit Protection Act, ordinary garnishment for a consumer debt cannot exceed the lesser of 25 percent of disposable earnings or the amount by which weekly disposable earnings exceed 30 times the federal minimum wage. Disposable earnings means what remains after legally required deductions such as taxes, Social Security, Medicare, and mandatory retirement contributions, not after rent and groceries. The Department of Labor publishes how the calculation works.

Title III also prohibits an employer from firing an employee because of garnishment for a single debt, though that protection does not extend to multiple garnishments.

State law frequently protects more, and in a few states it protects everything. Texas and Pennsylvania generally do not permit wage garnishment for ordinary consumer debts at all. North Carolina and South Carolina restrict it severely. Florida exempts the wages of a head of family meeting statutory conditions. Where state and federal rules differ, the one more favorable to the debtor controls, so the state rule is the one to check first.

Higher caps apply for child support and alimony, reaching 50 to 65 percent of disposable earnings depending on whether the person supports another family and how far behind the arrears run.

Social Security and SSI

Social Security retirement and disability benefits are exempt from garnishment by private creditors. A credit card company, a hospital, a landlord, or a debt buyer with a judgment cannot reach them.

Four government related exceptions do get through. Child support and alimony can be enforced against benefits. The IRS can levy up to 15 percent of a monthly payment for delinquent federal taxes. Other non-tax federal debts, most commonly defaulted federal student loans, can be offset at up to 15 percent with the first $750 per month protected. And federal court ordered victim restitution can reach benefits.

Supplemental Security Income is stronger still. SSI is protected from garnishment entirely, including from government debts and from child and spousal support. Our full breakdown is in can Social Security be garnished.

Veterans and Military Benefits

VA disability compensation and pension benefits carry federal protection from creditor garnishment similar to Social Security, with narrow exceptions primarily involving child support and alimony where a veteran has waived military retired pay to receive VA compensation.

Military retired pay is treated differently from VA disability compensation and is more exposed, particularly to family support obligations and to division in divorce. Anyone dealing with both should be clear about which payment is which, since the protections are not the same. The CFPB covers the general framework in its guidance on whether a debt collector can take federal benefits.

Other Federal Retirement and Benefit Income

Civil Service Retirement System and Federal Employees Retirement System annuities carry federal protection from ordinary creditors, subject to the same family support and federal debt exceptions.

Railroad Retirement benefits are protected under their own statute. Black lung benefits, federal emergency disaster assistance, and most federal student aid disbursements are similarly shielded.

Federal employee retirement contributions and Thrift Savings Plan balances have protections, though the analysis differs once funds are distributed.

Public Assistance and State Benefits

Public assistance programs are generally exempt, and the protection is usually both federal and state.

Temporary Assistance for Needy Families, SNAP benefits, and general state public assistance are exempt from creditor garnishment. Child support you receive is exempt, since it belongs to the child rather than to you. Workers compensation benefits are exempt in most states.

Unemployment compensation is exempt in most states, though the specifics vary and a few states permit garnishment for limited purposes. This is one to check locally rather than assume.

Crime victim compensation payments and, in many states, personal injury settlement proceeds carry exemptions, sometimes capped at a dollar amount.

The Bank Account Complication

Income being exempt does not automatically mean the money stays safe once deposited, and this is where the protection most often breaks down in practice.

Federal rules solve part of it. When a bank receives a garnishment order that was not obtained by the United States or issued by a state child support agency, it must review the account and automatically protect an amount equal to federal benefits directly deposited during a two month lookback period. That happens without the account holder filing anything.

Two limits matter. The automatic protection applies only to benefits received by direct deposit, so someone cashing a paper check and depositing cash loses it. And it covers two months of benefits, not accumulated savings beyond that window, though those funds may still be exempt if the account holder claims the exemption in court.

Commingling creates the other problem. When exempt benefits sit in the same account as wages, a spouse's income, or other deposits, tracing which dollars are protected becomes your burden to prove. Keeping benefit deposits in a dedicated account with nothing else in it is the single most effective protective step available.

What Is Not Protected

Being clear about the other side helps.

Wages above the exemption threshold are reachable. Bank balances beyond protected amounts are reachable. Tax refunds are generally reachable once deposited, and federal refunds can be offset for certain government debts before you ever see them. Rental income, self employment income, and business receipts are reachable. Investment accounts and most non-retirement brokerage balances are reachable, though retirement accounts have separate protections.

Independent contractor income deserves a specific caution. Because contractors are not employees, some states allow a creditor to reach payments owed by the client through a different mechanism than wage garnishment, sometimes without the 25 percent cap. Contractors should not assume they have the same protection an employee does.

What to Do If Exempt Income Gets Taken

Move quickly, because deadlines are short and funds can be released to the creditor.

Contact the bank first, state that the account holds exempt income, and ask what protected amount was calculated during the account review. Then file a claim of exemption with the court that issued the garnishment. Every state has a form and a deadline, often measured in days. Bring bank statements showing the deposits and a benefit verification letter.

Legal aid organizations handle these cases routinely and many take them free for people whose income is entirely benefits.

One thing that does not change: exempt income protects the money, not the debt. The balance remains owed, continues reporting to the credit bureaus for seven years from the original delinquency, and a judgment can sit enforceable for years in case circumstances change. Our posts on how long you can ignore debt collectors and being sued by a collection agency cover where the real exposure sits.

And always respond to a lawsuit by the deadline even if every dollar you receive is exempt. Being effectively judgment proof is a practical condition, not a legal defense, and answering preserves defenses including the statute of limitations. If a collector claims it will garnish exempt benefits for an ordinary consumer debt, that is a threat of action that cannot legally be taken, in the same category as the arrest threats covered in can debt collectors issue a warrant. Document it and complain through the CFPB's debt collection resource center.