NPR and ProPublica have been studying the use of garnishments to collect consumer debt, with the help of payroll firm ADP. Garnishment occurs when a court orders a judgment debtor’s employer to turn over some of the debtor’s paycheck to a creditor, or orders a bank to turn over the contents of a debtor’s accounts to a creditor. ADP’s full report is available from ProPublica here.
In its first piece on the subject, NPR noted that “10% of working Americans between the ages of 35 and 44” are subject to wage garnishment. 9-10 million Americans are subject to wage garnishment, mostly blue-collar workers, who earn less than average, but can generally get by.
The federal cap on garnishment, used in half of states, is 25%. The experiences of some NPR interviewees demonstrate that losing a quarter of one’s paycheck can leave that person without enough money to pay for everyday costs, and still does not substantially reduce the debt owed.
NPR also looked at the garnishment of bank accounts. Bank accounts are not subject to any general protection from garnishment, unless they contain social security payments or other exempt assets. So, it is possible for creditors to seize everything in the account. That only imposes greater costs on debtors, who then have to take on more debt to pay for everyday necessities like food.
There are some exemptions which can be used to protect bank accounts from garnishment, but they vary a lot from state to state and often rely on the debtor to take action to claim the exemption. The National Consumer Law Center examined state garnishment laws in its report “No Fresh Start“.