Wage garnishment is a powerful remedy available to creditors: it allows creditors to have part of a debtor’s wages or salary sent to the creditor, to satisfy a legally recognized debt (typically, one evidenced by a court judgment in the creditor’s favor).
However, North Carolina strongly disfavors wage garnishment. In North Carolina, wage garnishment is only available for debts resulting from: taxes, student loans, county ambulance services, and alimony or child support. That means that in North Carolina, a credit card issuer, a store which sold consumer goods on credit or time, an automobile dealership, someone suing to enforce their rights under a contract, etc. may not use wage garnishment to seek repayment.
Note, though, that creditors from other states may be able to get a garnishment order through their own state courts. If they do, North Carolina employers would have to garnish the wages of North Carolina residents, even for debts that would not result in garnishment for a North Carolina creditor. In those cases, garnishment will be governed by the law of the other state.
North Carolina Garnishment Exemptions and Non-Exemptions
Even for those few domestic or government debts for which North Carolina allows garnishment, there are many protections for the debtor. These take the form of exemptions for various types of income—i.e. income from certain sources either may not be garnished, or may only be garnished to an allowable degree:
- Social Security: under federal law, it can only be garnished for child support, alimony, federal taxes, and certain other debts to the federal government.
- Pensions: not only are public employee pensions (including state, county, and municipal workers; police and fire; and teachers) protected from garnishment, but retirement benefits from IRAs and other accounts or funds treated like IRA (including employer-established ones) are exempt, too.
- Public assistance or benefits: common forms of public assistance enjoy protection from garnishment, including: workers’ compensation; unemployment benefits, aid to families with dependent children; special assistance; aid to the blind; crime victim’s compensation.
- Insurance benefits and annuities: a few insurance benefits are also protected, including life insurance benefits and fraternal society benefits.
North Carolina Maximum Threshold
To the extent garnishment is allowed in North Carolina, it would be subject to the federal maximum threshold, which provides a nation-wide “floor” of minimum protection. Under federal law, the lesser of the following may be garnished:
- A total of 25% of disposable income; or
- The amount by which a debtor’s weekly income exceeds 30 times the minimum wage
For purposes of determining how much may be garnished, “disposable income” is ALL income left after legally required paycheck deductions, of which withholding for FICA is the most common and best known. As a result, most income will be considered “disposable income.” As a rough rule of thumb, it’s safe to assume that for anyone making much over minimum wage, that 25% of at least 90% of their income could be garnished.
However, the 25% rule is for most debts. There are certain debts, like taxes or child support, where more of the debtor’s income can be garnished. Since those are the debts for which North Carolina allows garnishment, if someone is being garnished in North Carolina, there’s a good chance that half (or more!) of his or her disposable income may be subject to garnishment.
Statute of Limitations
Since almost all wage garnishment is prohibited in North Carolina, except for causes of action (such as growing out divorce) where the statute of limitations, or time to sue, is less important, the main statute of limitations relevant to North Carolina wage garnishment is that for the enforcement of judgments. Once someone (e.g. an ex-spouse) has a judgment or court order in his or her favor, they have 10 years in which to enforce it.
Writ of Garnishment
The important thing to remember about garnishment—in North Carolina or elsewhere—is that the debtor actually has little involvement in it. Garnishment is between the creditor—who has a judgment ordering payment, or some other legal determination or right to seek payment (such as a tax authority might have—and the garnishee. The garnishee is the person or entity which has possession of money owed to the debtor, such as the debtor’s employer, which owes the debtor wages or salary for employment.
The creditor gets an order from the court, directing the garnishee to divert part of the debtor’s salary, wages, etc. for the creditor’s benefit. Assuming that the underlying judgment is valid and the garnishee has some of debtor’s money, the garnishee will need to comply with the writ or order or garnishment. More on Stopping Wage Garnishment in North Carolina.
Getting Legal Help
A North Carolinian faced with garnishment may be faced with a garnishment ordered by a foreign (another state) court. In that case, the North Carolinian should retain a lawyer who is admitted to that state’s bar and who can make sure the judgment and garnishment are valid, as well as seek to enforce any applicable exemptions or restrictions on garnishment.
For one of the few types of garnishments allowed in North Carolina, the debtor’s best bet is probably to work with an attorney to show that either (1) the debtor never received proper notice regarding the underlying debt or judgment, and so never had a chance to dispute it; or (2) that as much as possible of the debtor’s income comes from one of the protected or exempt categories (such as public benefits or pension benefits), so as to reduce the debtor’s disposable income and therefore the amount which could be garnished.
For more information:
North Carolina General Statutes[http://www.ncga.state.nc.us/gascripts/Statutes/StatutesTOC.pl]
FAQ sheet about Federal garnishment rules[http://www.dol.gov/whd/regs/compliance/whdfs30.pdf]
Social security and garnishment[http://www.ssa.gov/deposit/DDFAQ898.htm]