Jennifer’s paystub is downright depressing. It’s bad enough that she earns less than $11 an hour as a single mom in Wisconsin. Her gross pay of roughly $800 every two weeks would challenge anyone trying to run a household, but that’s not the half of it. Jennifer is one of millions of Americans facing wage garnishments for unpaid debts — in her case, a student loan used to pay for online classes. She’s also garnished for child support, a double-whammy. By the time her taxes are deducted, just $410 ends up in her checking account.
If that doesn’t sound right to you, it shouldn’t: The student loan garnishment eats up 15% of her after-tax pay, while the child support takes an additional 25%. That exceeds the garnishment caps established by federal law and Wisconsin state law. But garnishment procedures generally require employees to file an appeal in such circumstances, and Jennifer had no idea how to do that when she reached out to me after reading a story in the Credit.com Debt Collection Files.
Jennifer asked that her identity be masked to avoid any conflict with her employer (“It may not be much of a job but it’s what I got.”) She sent me a copy of her paystub to confirm the details of the garnishments.
“I work a full time job, 40 plus hours a week in a call center…and can barely survive with what I am left with,” Jennifer said.
Wage Garnishment in America
An astonishing 1 in 14 U.S. workers face wage garnishment from their regular paychecks, according to a recent study published by payroll processing firm ADP. Nearly half of them are paying court-mandated child support, but almost as many — roughly 3 million Americans — are facing automatic paycheck deductions to pay back student loans or other kinds of debt, the report found.
In other words, America’s employers have become a de facto army of debt collectors.
Employers aren’t happy about it. Garnishments can create unnecessary ill will with employees, and they can also create unexpected liability. The maze of state and federal law governing garnishments can be hard to follow.
But if it’s rough on payroll professionals, it can be much rougher on consumers. Jennifer tried objecting to her employer this summer, the first time her paycheck was cut nearly in half, complaining that the cut placed her below the income floor which allows one of the few garnishment exemptions.
“I was told that it didn’t matter once it was applied,” she said.
It’s unclear that she would have qualified for the federal exemption anyway — a worker earning more than $290 per week ($7.25, the minimum wage, times 40) enjoys no federal exemption.
Unraveling the Confusion
Wisconsin state law offers additional protections over and above the federal law. The law makes clear that a second garnishment order cannot be enforced if a worker is already facing 25% garnishment for child support. Jennifer knew that, but had no idea how to stop the money from flying out of her paycheck. When she complained to her employer and the U.S. Department of Education, both sides blamed each other.
“Neither will take fault therefore neither want to be the one to fix it. From my understanding, it was up to my payroll department to deny the garnishment as I was already over the (cap) but they put it through anyways,” she said.
The $101 deducted from her paycheck for overdue student loans is levied by the U.S. Department of Education for a Stafford Loan Jennifer received to attend Globe University, a for-profit online school where she had been working towards a college degree in criminal justice. Together with a second loan she received directly from Globe, she owes the school $23,000 currently, and cannot complete her degree until she repays the money.
“The stress of everything over the last few months actually had me physically ill. I dropped 30 lbs. in three months,” she said. “I haven’t even checked my mail in a good three weeks because I don’t want to know what is in there.”
She’s been paying child support for two years to help with expenses for kids from a prior marriage – she has two other kids at home now – and says she has no problem with that garnishment. The second deduction, which took effect earlier this year, was the real kick in the teeth.
“I have wanted to (appeal) because I am in danger of losing my home because of this but I really don’t understand how. They seem to make it complicated to do. It’s been going on for months so I have no idea where my paperwork went,” she said.
Who Can Help?
When garnishments are served on workers, the form for filing an appeal is supposed to be included with the rest of the paperwork. Time is of the essence — it’s much harder to stop a garnishment once it has started. Jennifer doesn’t recall if the form was included with her order.
For advice on what Jennifer should do next, I turned to New York-based consumer lawyer Joel Winston. Here’s what he said:
“If the [employee] believes that some or all of her wages are protected, she should respond directly to the employer at any time after the garnishment starts. The employer is then required to report the objection to the creditor. If the creditor disagrees with the employee’s exemption claims, it is up to the creditor to request a hearing with the local civil court. The court then decides how much of the employee’s wages can be garnished and how much will be exempt. Child support payments will take priority.”
Winston also found a link to a form called “Earnings Garnishment – Debtor’s Answer” on the Wisconsin Court System website that allows employees to contest garnishments.
Winston warned that doing anything to adjust a garnishment involving child support can be tricky, and urged Jessica or anyone else in her situation to proceed with great caution.
“I would strongly advise this consumer to contact a local attorney for specific advice as soon as possible. The National Association of Consumer Law Attorneys has a lawyer referral service with a few dozen attorneys in Wisconsin,” he said. “Locally, the Wisconsin State Bar Association provides a lawyer referral service and they also offer a Reduced Fee Lawyers Service and Hotline. If a free option is a better fit, look for a legal aid society within the community. For example, the Milwaukee Legal Aid society offers free legal clinics for civil issues. Some clinics are walk-in, others are by appointment only.
There might be some reason to hope for a quick improvement in Jennifer’s situation. After chatting with Credit.com, Jennifer had a better understanding of her rights, and discussed the issue anew with her payroll department, and potentially made some headway.
“(He) first tried telling me to call the (U.S.) Department of Education and when I explained I already had, he took a closer look,” she said. Jennifer’s next paycheck should be adjusted so her total garnishment doesn’t exceed 25%, she was told, getting her another $50 weekly. “It’s not much, but it’s a start.”
More on Managing Debt:
- How to Pay Off Credit Card Debt
- 5 Tips for Consolidating Credit Card Debt
- Top 10 Debt Collection Rights