Federal law allows up to 25 percent of an employee's disposable wages to be garnished by a creditor that has received a judgment against the employee. An employer is sometimes permitted to charge its own fee to the employee or the creditor for processing the garnishment. The rules vary by state.
Purpose of Fee
Although federal law prohibits employers from being able to terminate an employee for having one garnishment order, many states permit an employer to withhold a fee to compensate it for the administrative cost of processing a garnishment order. When an employer receives a writ of garnishment, its staff or legal counsel responds to the writ of garnishment, calculates the employee's non-exempt earnings and processes this information during each pay period.
How to Collect the Fee
Garnishment processing fees are regulated at the state level. In states that allow them, the state itself sets out the process involved in collecting the fee. Some states only permit the collection of such a fee for child or spousal support obligations. Many states require the fee to be borne by the debtor. In these states, the administrative fee is taken directly out of the employee's wages. Some states specify that the fee cannot be assessed if the combined amount of the processing fee and the garnishment would exceed the amount permitted by law. Arizona, Michigan, Minnesota, Nevada, North Dakota, South Dakota, Utah and Wisconsin require the creditor to pay the fee. In these states, the creditor might have the fee deducted from each garnished amount, or the creditor might pay a fee when the garnishment commences. Indiana requires the debtor and creditor to evenly split the cost of the fee.
The amount of the fee varies by state. Most are nominal, often amounting to a range of $1.50 to $5 per garnishment. However, some states allow for much higher fees. For example, as of publication Indiana assesses a fee of $12 or 3 percent of the total amount garnished, whichever is greater. Some states permit only one fee to be assessed when the writ is served, while others allow for a fee assessment every pay period. The amount allowed for a child support garnishment is often different than the fee permitted for consumer debts.
Banks might also charge processing fees if a customer's bank account is garnished. However, additional protections apply to bank garnishments, such as prohibiting the garnishment of certain federal and state benefits like Social Security, unemployment compensation, workers' compensation and retirement benefits, depending on state law. If all of the funds in a bank account are garnished, the bank usually cannot charge a garnishment processing fee. For bank levies, such as those that occur because of tax debt, the bank can charge a processing fee if funds remain in the account beyond the levied amount.
Read More: Types of Garnishments in Order of Priority
- Nolo: State Laws on Wage Garnishments
- Washington Office of Financial Management: 25.60 -- Garnishments and Wage Assignments
- American Payroll Association: APA to ULC Proposal
- FindLaw: Ind. Code § 24-4.5-5-105
- United States Department of Labor: Fact Sheet #30: The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title 3 (CCPA)
- Internal Revenue Service: Part 5. Collecting Process
- Oregon.gov: How to Protect Your Assets from Creditors in Oregon
Samantha Kemp is a lawyer for a general practice firm. She has been writing professionally since 2009. Her articles focus on legal issues, personal finance, business and education. Kemp acquired her JD from the University of Arkansas School of Law. She also has degrees in economics and business and teaching.