November 24, 2017

Wage Garnishment in North Carolina: on the way?

Payday will not have the same meaning when wages are subject to garnishmentIn many states, judgment creditors can satisfy judgments by requiring the debtor’s employer to withhold a portion of the debtor’s wages to be applied to the judgment.

This has not been the case in North Carolina because North Carolina General Statute §1-362 provided that earnings within 60 days prior to a garnishment order could not be reached by the creditor.

This effectively prevented wage garnishment.

But, in all likelihood, this will not be true for much longer.

Garnishment bill may pass in summer 2015

Senate Bill 632 was filed on March 26, 2015. The bill does away with the wage protection of N.C. Gen. Stat. 1-362 and establishes provisions for wage garnishments.

The general feeling in the legal community is that this bill will pass, and we will have wage garnishment in North Carolina, perhaps as early as this coming July.

Without going into the nitty gritty of the proposed statute, the most important provions are as follows:

  • An order will be served on the employer directing that funds be withheld from “disposable income” to pay the creditor
  • Disposable income is defined as income less withholdings for taxes, unemployment insurance and social security
  •  The amount to be withheld is capped at the lesser of:
    • 25% of weekly disposable income, or
    • 25 % of the amount that the weekly disposable income exceed 30 times the federal minimum wage.

Calculating the garnishment

As an example, the debtor’s disposable income is $500.  30 times $7.25 (current minimum wage) times 30 equals $217.50.  The result would be 25% of $282.50 or  $70.62

I don’t know whether or not that this will be a major game changer.  However, I do know that folks who are using their full earnings to make ends meet will be forced to consider a bankruptcy filing in order to escape wage garnishment.

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