Wage garnishment limits by state for unpaid loans

Federal law caps wage garnishment for an ordinary debt at 25 percent of a borrower's disposable weekly earnings, and less for low earners. States may protect more, and many do: Texas, Pennsylvania, and South Carolina block wage garnishment for a typical unpaid personal loan, and several others set caps well under 25 percent.

The federal floor comes from 15 U.S.C. 1673. For any workweek, a creditor may take the lesser of 25 percent of disposable earnings or the amount by which disposable earnings exceed 30 times the federal minimum hourly wage. Disposable earnings are what remains after deductions the law requires, such as tax withholding. For pay periods other than a week, the Secretary of Labor, who heads the U.S. Department of Labor (DOL), sets equivalent multiples by regulation. Section 1677 then says the federal rules do not override state laws that prohibit garnishment or allow less of it, so the stricter rule wins.

If you are the lender, the table shows how much of a borrower's paycheck your judgment can reach in each state. For the full collection process, from judgment to the employer's first check, see our guide to wage garnishment and collecting a judgment on an unpaid note.

States that protect more than the federal floor

Three states in the table close the door on garnishing wages for an ordinary private loan. The Texas Constitution says "No current wages for personal service shall ever be subject to garnishment," with exceptions only for child support and spousal maintenance. Pennsylvania exempts wages held by an employer except for a short list of claims, and South Carolina bars applying a debtor's earnings to a judgment in supplementary proceedings. North Carolina comes close: earnings from the 60 days before the court's order cannot be applied when they are needed to support the debtor's family.

Florida and Missouri protect heads of household. In Florida, a head of family is anyone providing more than half the support for a child or other dependent. If that person's disposable earnings are $750 a week or less, all of it is exempt, and pay above $750 can be garnished only if the borrower signed a waiver in a separate document. Missouri limits garnishment to 10 percent for a resident head of family.

Other states keep garnishment but shrink it. Arizona and New York cap it at 10 percent, Arizona of disposable earnings and New York of gross income. Illinois takes no more than 15 percent of gross pay, Massachusetts protects at least 85 percent of gross wages, and California caps it at 20 percent. Minnesota slides from 10 to 25 percent depending on weekly income, and Nevada takes 18 percent from workers grossing $770 a week or less.

For lower earners, the minimum-wage multiplier matters more than the percentage. The federal test shields 30 times the federal minimum wage each week. Washington uses 35 times, Connecticut, Virginia, and Minnesota use 40, Illinois 45, California 48, Massachusetts and Nevada 50, and Arizona 60. Several of those states measure against a state or local minimum wage that is higher than the federal one, which widens the protected amount further.

What a $1,500 paycheck yields in five states

Picture a borrower who earns $1,500 a week before taxes and keeps $1,200 in disposable earnings. You hold a $10,000 judgment on an unpaid note. Under the federal floor, you can take 25 percent of $1,200, or $300 a week. The minimum-wage test would only give a smaller number if 30 times the federal minimum wage topped $900, which would take a minimum wage above $30 an hour.

In Illinois, the cap is 15 percent of $1,500 gross, or $225 a week; the other test would only bind if 45 times the minimum wage exceeded $975, a minimum wage above about $21.67. In Massachusetts, 85 percent of $1,500 is $1,275, so $225 is reachable unless 50 times the minimum wage tops $1,275, which would take a wage above $25.50. In New York, 10 percent of $1,500 gross is $150 a week. In Texas, the answer is $0.

Those differences add up. At $300 a week, $10,000 takes about 33 weeks to collect, before interest and costs. At $225 it takes about 44 weeks, and at $150 about 67 weeks. In Texas you would have to look to bank accounts or nonexempt property instead, which is why a lender dealing with a Texas borrower may want a secured promissory note backed by collateral. Before you file anything, confirm your deadline with the statute of limitations lookup.

Sources

• 15 U.S.C. 1673 (govinfo)
• 15 U.S.C. 1677 (govinfo)
• Texas Constitution article XVI
• Pennsylvania 42 Pa.C.S. 8127
• South Carolina Code 15-39-410
• South Carolina Code 37-5-104 and 37-5-106
• North Carolina General Statutes 1-362
• Florida Statutes 222.11
• Missouri Revised Statutes 525.030
• New York CPLR 5231
• Arizona Revised Statutes 33-1131
• Illinois 735 ILCS 5/12-803
• Massachusetts General Laws ch. 246, section 28
• California Code of Civil Procedure 706.050
• Minnesota Statutes 571.922
• Nevada Revised Statutes chapter 31
• Washington RCW 6.27.150
• Oregon Revised Statutes chapter 18
• Connecticut General Statutes chapter 906
• Code of Virginia 34-29