An Overview of Wage Garnishment in Arizona

Wage garnishment is the most common type of garnishment. In Arizona, the wage garnishment process usually starts when a creditor files a writ of garnishment of earnings, therefore, initiating a civil lawsuit against a debtor, who has defaulted on payments. If the judge rules for the creditor, the Court grants a money judgment in favor of the creditor and against the person owing the money. The judge issues a court order to the creditor. If the debtor does not pay, then the creditor can use the money judgment to file for a wage garnishment. The creditor serves the wage garnishment documentation on the debtor’s employer, and it requires the employer to withhold (garnish) a specified amount from the debtor’s paycheck each pay period. If your employer has been served with this court order, they cannot refuse to garnish your wages without severe repercussions. The court order requires your employer to send the funds to the person or organization that you owe money until the debt is paid off unless other payment arrangements are made with the Court or creditor.

Although all types of debt are collectible by wage garnishment, the most common types are:

• Federal, state, and local taxes;
• Court costs;
• Credit cards;
• Medical expenses;
• Child support;
• Alimony; and
• Student loans.

For some kinds of debt, such as: federal student loans, back federal taxes, and child support, creditors do not need to obtain a court order to garnish your wages. The process, known as an attachment of earnings, simplifies the legal procedure for qualifying creditors to garnish debtors’ wages.

Keep reading for a review of wage garnishment in Arizona, which includes answers to common questions regarding wage garnishment, such as:

• Can my employer fire me if my wages are garnished?
• How long before a creditor can garnish your wages?
• Can my pay be garnished?
• Is there a limit on wage garnishment?
• Should you file for bankruptcy if your wages are garnished? and
• Can you stop a wage garnishment?

Can My Employer Fire Me if My Wages are Garnished?

Whether or not your employer can fire you if your wages are garnished depends on how many creditors are garnishing your wages. Wage garnishment laws, in addition to limiting the amount that can be deducted from your pay, protect employees from being terminated. However, states can enact stricter protections. At a minimum, the law protects employees from termination for a single wage garnishment.

If your pay is being garnished by only one creditor for a single debt, the Consumer Credit Protection Act (CCPA) makes it illegal for your employer to fire you. This is regardless of how many legal proceedings are brought to collect the debt. An employer who illegally fires an employee because they are required to garnish their wages may have to reinstate the terminated employee with back pay. If employers willfully violate this protection, they can face criminal charges with up to one year imprisonment, fines, or both.

If you have garnishment orders from more than one creditor, your employer can legally terminate your employment in most states. Arizona law provides added protections for employees by disallowing termination if your pay is being garnished for child support.

For example, if Miguel’s wages were being garnished for a credit card debt and his employer received a second garnishment for child support, under CCPA his employer could terminate him. However, in Arizona, the state law protects him, since the second garnishment is for child support. In this situation, his employer would not be able to terminate his employment because he has a second garnishment.

How Long Before a Creditor Can Garnish Your Wages?

The time it will take before a creditor can garnish your wages will depend on the type of debt. If it is an unsecured debt, for example credit card bills, personal loans, or medical expenses, the creditor usually waits until the account is six months delinquent or more to file a lawsuit. Most creditors will not be able to garnish your wages until they receive a money judgment by winning the civil lawsuit they filed. Some debts, like child support, federal taxes, and student loans, do not require the creditor to obtain a money judgment.

It is important to take notices from the creditor seriously. If they file and win a lawsuit for money judgment, you could be responsible for the debt owed, interest and fees, court costs, and attorney fees. If you are concerned wage garnishment is imminent, it is important to seek legal counsel immediately.

Can My Pay Be Garnished?

Your pay can be garnished if the creditor meets all the other requirements and you have collectible wages. There are certain circumstances when your pay cannot be garnished by creditors, including:

• your wages are already garnished for the maximum amount allowed by law;
• you have a pending bankruptcy proceeding;
• your judgment has been discharged in a bankruptcy proceeding;
• your debt was subject to an effective agreement for debt scheduled between a qualified debt counseling organization and you; and
• you have no collectible wages.

Collectible wages are wages, salaries, commissions, bonuses, and other types of income.  Certain types of income are exempt from being garnished, for example: public assistance, Social Security, workers’ compensation, unemployment, and grant payments and student loan disbursements. Also, almost all types of retirement benefits and some types of insurance benefits cannot be garnished. Typically, savings are exempt from garnishment as well, if you can verify they come from these sources.

Is There a Limit on Wage Garnishment?

There is a limit on wage garnishment. Arizona has not imposed stricter limits on wage garnishment than the federal Consumer Credit Protection Act (CCPA). CCPA allows for a maximum amount of 25% of your pay or any wages above thirty (30) times the federal minimum wage, whichever is less, to be garnished from your non-exempt disposable earnings. Disposable earnings are the amount of pay that is left after required tax deductions. Other deductions taken from pay for items like health insurance, life insurance, or contributions for charitable organizations do not reduce your disposable earnings.  Also, your disposable earnings are not reduced by any amount for your housing costs, personal expenses, or other debts and loans.

For example, John earns $10 an hour and works forty (40) hours a week. His paystub shows the following:

Gross Pay                   $400 ($10 x 40 hours)
Federal Taxes             – $40
State Taxes                 – $10
Social Security Tax    – $20
Medicare Tax              – $5
Health Insurance         – $25
Life Insurance             – $5
Charitable Donation    – $5

Net Pay                       $290

Although John’s take home pay is $290, his disposable earnings would be $325 ($400 gross pay – $40 federal taxes, – $10 state taxes, – $20 Social Security tax, and – $5 Medicare tax). He would not be able to reduce his disposable earnings by the amount he pays for health and life insurance and the amount he contributes to the charity.         

In the example above, 25% of John’s disposable earnings is $81.25 ($325 x 25%). Because this amount is less than the amount greater than thirty (30) times the federal minimum wage, this would be the maximum amount that could be garnished from his wages.

Certain types of debt are not subject to the same limits explained above. Wage garnishment laws allow much higher percentage of your disposable income to be applied to the repayment of state and federal taxes, voluntary wage assessments, child support, alimony, and bankruptcy court orders.

If you have more than one garnishment, the creditors must either share the 25% or wait in line. For example, if John’s wages were garnished 15% for a defaulted student loan and his employer received another garnishment from a credit card company, the employer could only take another 10% (25% maximum amount – 15% already garnished) of John’s income for the credit card creditor.

If the creditors must wait in line, the debts get paid in the following order:

1. child support,
2. federal debts,
3. state and local tax debts, and
4. otherwise unsecured debts.

If there is more than one unsecured debt, they are paid in the order they were received. Rarely, the creditors share the 25%. In most situations, what this means is the first creditor in line will receive 25% of your wages (unless the judge reduces the amount) until they are paid in full. Then the next in line will garnish your wages for 25% until they are paid off and so forth until all the creditors have been paid.

In the same example above, if John’s employer received a third wage garnishment for credit card company B, the employer could not further garnish John’s wages for credit card company B because the maximum amount is already garnished by the student loan company and credit card company A. Credit card company B will need to wait in line to garnish John’s wages until credit card company A is paid off.

If you can prove extreme financial hardship, the judge issuing the court order can reduce the amount garnished. In accordance with Arizona and federal law, the judge may reduce the wage garnishment to 15% of your non-exempt disposable earnings. In most cases in Arizona, judges will grant this request.

Should You File Bankruptcy if Your Wages are Garnished?

If your wages are garnished or wage garnishment is imminent, you should consult an experienced bankruptcy attorney immediately. Wage garnishment is a red flag you should consider filing bankruptcy. Depending on your individual circumstances and the type of debt you have will determine if bankruptcy is right for you. Not all types of debt are dischargeable in bankruptcy proceedings. However, more likely than not, it is time to file a bankruptcy petition.

Bankruptcy can afford you protections against wage garnishments. Once you file bankruptcy, an automatic stay becomes effective that stops creditors from trying to collect on your debts. This process stops wage garnishment dead in its tracks. Although most debts are subject to the stay, some types of debt, like child support and alimony, are not stayed by a bankruptcy petition.

If the debt subject to wage garnishment is dischargeable in bankruptcy court, filing bankruptcy can end the wage garnishment permanently. If the debt is not dischargeable in bankruptcy, other debt you have incurred may be discharged, freeing up necessary money to help you pay off the debt subject to the wage garnishment.

Consulting an experienced bankruptcy attorney will help you determine if filing bankruptcy is right for you. For many people, filing bankruptcy provides a fresh start needed to build a financially healthy life.

Can You Stop a Wage Garnishment?

The easiest way to stop a wage garnishment is to avoid it before it occurs by establishing payment arrangements with your creditor. If the creditor has already started garnishing your wages, see above about how filing bankruptcy can stop wage garnishment dead in its tracks.

To stop a wage garnishment, it is important to understand and follow the legal procedures. If the legal procedures are not followed correctly, the Court can even issue penalties against the responsible party. The process is so complicated that even the Arizona Judicial Branch warns that “all parties to a garnishment are strongly urged to obtain legal advice from an attorney.”

To stop a wage garnishment that is imminent make sure you respond to the notification and attend the court hearing. The Court will find in favor of the creditor, if you do not attend the hearing. If you have received a Writ of Garnishment and Summons, Initial Notice to Judgment Debtor of Garnishment, Request for Hearing on Garnishment, and/or Notice of Hearing on Garnishment, you have a limited amount of time to object. It is important you contact our office immediately to discuss your rights, so we have time to prepare your defense.

The Final Note

Wage garnishments should be taken seriously. If your employer is served with a court order granting a wage garnishment, they will have no choice but to deduct the amount from your wages and submit to it to your creditor. Also, if you have more than one garnishment, your employer may be able to terminate your employment.

If your wages are being garnished, you have received a notice for a court hearing, or creditors are threatening you, talk to an experienced bankruptcy attorney. Do not delay! A bankruptcy attorney can review your rights and discuss options for reducing or stopping your wage garnishment. Arizona Law Group of Trezza & Associates offers a free consultation. Call today, you have nothing to lose.