There are several different ways to collect on a debt when the party who owes money isn’t cooperative. In some cases, creditors can take debtors to court and can secure a judgment against them. With a judgment, it may be possible to intercept a portion of an individual’s income. Wage garnishment rules allow creditors to secure payment directly from a debtor’s employer as part of the regular payroll process.
Wage garnishment is effective because it prevents the debtor from using the funds before they reach the creditor. Wage garnishment has the potential to help creditors collect what they deserve, but it can also potentially cause financial hardship for those who have already fallen behind on their obligations. As such, the state limits garnishment.
Individuals typically need to make enough money for garnishment to be a worthwhile undertaking. How much do debtors need to earn for garnishment to be a viable option?
Garnishment is more effective with higher wages
The more an individual earns, the more creditors can theoretically intercept to pay down what they owe. The current state minimum wage plays a major role in determining how much income is vulnerable to collection efforts.
Generally speaking, garnishment is only an option if the debtor makes more than 40 times minimum wage weekly. Creditors can potentially seek to intercept a portion of the debtor’s disposable income. In some cases, creditors can secure as much as 20% of the debtor’s disposable income.
At most, creditors can receive 40% of the amount that exceeds 48 times the state’s current minimum wage or 50% of the amount earned in excess of 40 hours of minimum wage pay. Most people need to earn well over minimum wage to support themselves and their families.
Creditors with basic information about a debtor’s employment history can potentially use that information to determine if wage garnishment is a viable option. The minimum wage in California beginning January 1, 2025, is $16.50 per hour. If a worker earns more than $660 weekly, garnishment could be an option.
Intercepting a portion of a debtor’s income through wage garnishment may be an effective debt collection strategy in cases where debtors have proven reticent to make good on their financial responsibilities. Reviewing information about the debtor and prior collection efforts can help businesses explore garnishment and other collection options before going to court.