Wage Garnishment

What It Is:

A wage garnishment is an obligatory payment of a debt where a portion of an employee's paycheck is automatically withheld to pay the debt.

How It Works/Example:

Courts can set wage garnishments on individuals who become delinquent on their debt payments. Often, wage garnishments are given out when a person is delinquent on child support, spousal support, taxes or loans. If the debtor has a history of failing to pay, a wage garnishment can be implemented to automatically subtract money owed from his or her payroll without his or her consent. For example, if an individual becomes delinquent on $100 monthly loan payments, a wage garnishment automatically deducts the $100 from the person's paycheck and sends it to the lender.

Why It Matters:

Wage garnishments are often levied in association with delinquent child support payments and merchant credit balances. Though illegal in some U.S. states, wage garnishments can be a practical means for recovering long-term unpaid debts.