Wage Garnishment and Bank Levy–What’s the Difference?

A wage garnishment and a bank levy are collection actions once a creditor has obtained a court judgment. While judgment creditors can use both methods, wage garnishment is generally favored by private creditors. The IRS and the state typically use wage garnishment, however, to collect past due taxes and support obligations for children or spouses.

Wage Garnishment Process

If the debtor has a regular salary or wage and is not self-employed, a creditor can get a wage garnishment order that can seize up to 25 percent of the debtor’s wages. The creditor obtains a garnishment order from the court to give to the levying officer or sheriff who serves it on the debtor’s employer. The garnishment continues for each pay period until the judgment is satisfied.

The garnishment cannot be more than 25 percent of the debtor’s disposable earnings or the amount by which the debtor’s wages exceed 30 times the minimum wage, or whichever is lower.

If the garnishment is for child or spousal support, however, the creditor can garnish up to 50 percent of the debtor’s net pay, if the arrearages are at least 12 weeks. The garnishment could be up to 60 percent if the debtor does not support a child or spouse. Your state law, however, may limit the wage garnishment level to a smaller percentage, which takes precedence over federal law.

You cannot garnish someone’s wages if it is already under garnishment by another creditor unless the first one is less than 25 percent or if the garnishment is for child or spousal support.

No creditor can garnish social security disability, regular disability, child support or alimony payments.

Most state laws prohibit employers from firing an employee who has a wage garnishment order, unless the employee has had a number of garnishments from different creditors and the law does not prevent an employer from taking this type of action.

Bank Levies

A bank levy freezes your account or allows the creditor to take all or part of the bank account’s funds. The IRS likes to use this procedure. You can contest a bank levy by filing for an exemption with the court but you only have a limited time to do this.

Funds from government benefits or child support are not subject to bank levies. Also, the creditor can obtain multiple levies until the amount is paid. Your bank can also charge penalizes and fees if your account becomes insufficient.