Can unemployment be garnished by creditors?
Only for specific debts, like child support, alimony and federal taxes
+1 more
Losing your job can make it tough to keep up with bills, and unemployment benefits often provide a crucial lifeline. But what happens if you owe money—can creditors garnish your unemployment benefits?
In most cases, the answer is no. Creditors generally cannot take your unemployment benefits through wage garnishment. However, some exceptions could put your benefits at risk. Here’s what you need to know about how garnishment laws apply to unemployment benefits.
Wage garnishment is when a person’s earnings are legally withheld to resolve an outstanding debt.
Jump to insightUnemployment benefits are not typically included in wage garnishment.
Jump to insightUnemployment is not typically protected from taxes, student loans and child and spousal support.
Jump to insightIf you are facing wage garnishment, consider contacting an attorney for details on state laws that may affect your case.
Jump to insightWhat is wage garnishment?
Simply put, when you have an unpaid debt, a creditor can obtain a judgment from the court allowing it to collect payment via wage garnishment. In addition to your debt, a creditor may also seek fees, additional interest and collection costs.
Wage garnishments typically can’t exceed 25% of your earnings each week.
Wage garnishment is considered an involuntary wage assignment because the employee does not voluntarily agree to have their earnings diminished. It typically uses a court-ordered judgment, requiring your employer to withhold personal earnings until the debt is paid.
There are certain protections for employees who have their wages garnished. According to Title III of the Consumer Credit Protection Act (CCPA), your employee cannot fire you because of wage garnishment. However, this rule is void if your wages are garnished more than once.
Legal definition
The Department of Labor defines wage garnishment as “any legal or equitable procedure through which some portion of a person’s earnings is required to be withheld for the payment of a debt.” Personal earnings include wages and salaries, commissions and bonuses. It also includes income from a pension or retirement program. Tips are not typically included.
Can creditors garnish unemployment benefits?
Unemployment benefits are not typically subject to wage garnishment. In times of financial hardship, this income can be critical, so the government protects certain incomes.
Wage garnishments are taken from one’s disposable earnings. This does not include taxes, Social Security, Medicare and State Unemployment Insurance tax. It also excludes employee retirement withholdings as required by law.
State law may provide certain exemptions from garnishment. This can range from wages to property, so it is important to check state laws to see what provisions apply. Some federal benefits are also excluded from wage garnishment:
- Supplemental Security Income
- Federal Employee Retirement System (FERS) payments
- Civil Service Retirement (CSR) payments
- Veterans’ benefits
- Federal Railroad payments for retirement, unemployment and sickness
How much can my wages be garnished?
When you have a job, there are limits on how much a creditor can take from your wages, and a minimum amount must be left in your account. For example, if you earn $250 weekly, only amounts above $217.50 ($250 - $217.50 = $32.50) could be garnished. If you earn more than $942.50 but less than $1256.66 per month, $314.16 could be garnished.
Maximum wage garnishment for disposable earnings in 2025
| No garnishment | Partial garnishment | Maximum 25% garnishment | |
|---|---|---|---|
| Weekly earnings | Up to $217.50 | $217.51 - $289.99 | $290.00 or more |
| Biweekly earnings | Up to $435.00 | $435.00 - $580.00 | $580.00 or more |
| Semimonthly earnings | Up to $471.25 | $471.25 - $628.33 | $628.33 or more |
| Monthly earnings | Up to $942.50 | $942.50 - $1256.66 | $1256.66 or more |
Exemptions to garnishment protections
In most cases, wage garnishments may not exceed 25% of your disposable earnings each week. However, there are some cases when garnishment may vary:
- Child and spousal support: Under the CCPA, wages may be garnished up to 60% for a single child or spouse and 50% for multiple spouses or children.
- Taxes: If you owe back taxes, your wages are garnished differently from other types of debt. State laws vary, so it is best to consult with an attorney.
- Student loan debt: Your federal student loans are considered in default if you miss payments for more than 270 days. Wage garnishment for student loan debt is typically up to 15% of disposable income and goes on until the debt is repaid or the loan is no longer in default. Normal garnishment guidelines apply to private student loans.
Legal protections and options
To stop a garnishment on your unemployment benefits, you can claim economic hardship, check for an exemption or file for bankruptcy. If you feel your creditor is acting illegally, you can file a complaint with the CFPB.
Claim economic hardship
You might get an exemption for garnishment if you are facing economic hardship. A hardship is when all or most of your income is needed to pay living expenses. Unemployment is one example of an economic hardship, as the lack of income can prevent you from having the funds to pay your debt. To prove you are experiencing financial hardship, you must show the court proof of your expenses.
Ask a lawyer
Look for an attorney in debt collection or consumer law who can advise you on steps going forward. This professional can help clarify federal laws and confirm state ones while providing support when filing for exemptions. You also have someone to represent you in court and negotiate with creditors for a potential settlement.
To find an attorney, check the American Bar Association for your state or search for legal aid programs in your state that provide support for low-income individuals. If you are a service member, contact your local JAG office for assistance.
Consider debt counseling
If you are facing wage garnishment, there is help available. A credit counseling service or debt relief company like the National Foundation for Credit Counseling (NFCC) can work with you to create a budget and help you manage your money so you do not fall behind on your payments. These services work with you to avoid bankruptcy so you can pay off your debt and protect your credit score while you do it.
Ensure your creditor is acting legally
There are certain laws in place that dictate what a debt collector can do and how they may collect debt. For example, debt collectors may not call you after hours and are prohibited from contacting you at work when you cannot receive phone calls.
If you believe your creditor is acting illegally, you can file a complaint with the Consumer Financial Protection Bureau (CFPB).
Impact of bankruptcy on garnishment
Filing for bankruptcy can prevent most types of wage garnishment because it freezes all debt collection until the court approves a repayment plan. If you file for Chapter 7 bankruptcy, for example, your benefits are typically protected. It is possible to file for Chapter 13 bankruptcy with unemployment, but it tends to be a more complicated process than filing for Chapter 7.
Even if you file bankruptcy, you are still usually held responsible for your normal obligations for child and spousal support, as well as student loan debt. Filing for bankruptcy should be a last resort, as it can stay on your credit report for seven years or longer.
» SHOULD YOU: File for bankruptcy?
FAQ
Is unemployment protected from all types of garnishment?
No, unemployment is not protected from garnishments related to student loan debt, and child and spousal support.
Is filing for bankruptcy worth it to stop garnishment?
If you have no other way to pay your bills, bankruptcy can be a fresh start that eliminates most, if not all, of your debts. However, bankruptcy can stay on your credit report for seven years or longer, so it should be used as a last resort.
What does it cost to file for bankruptcy to stop garnishment?
The cost to file bankruptcy depends on the type of bankruptcy you choose. Fees and requirements can vary by state, so it is best to consult a local lawyer for advice on the best path forward.
What should I do with my student loans?
If you have student loans, you may want to consider rehabilitation. This is an agreement to make a certain amount of payments, which is typically 15% of your discretionary income. This brings you out of default and prevents any wage garnishment going forward.
If rehabilitation is not an option, consider refinancing your student debt or combining it with other debts into a debt consolidation loan. This will help you combine your student loan payments into one convenient payment with a competitive interest rate that could be lower than what you are currently paying.
Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- Department of Labor, “Fact Sheet #30: Wage Garnishment Protections of the Consumer Credit Protection Act (CCPA).” Accessed Jan. 30, 2025.
- Consumer Finance Protection Bureau, “Can a debt collector take or garnish my wages or benefits?” Accessed Jan. 30, 2025.
- Department of Labor, “Garnishment.” Accessed Jan. 30, 2025.
- Department of Labor, “The Federal Wage Garnishment Law.” Accessed Jan. 30, 2025.
- Federal Student Aid, “Default.” Accessed Jan. 30, 2025.
- Federal Student Aid, “What is wage garnishment?” Accessed Jan. 30, 2025.
- National Archives, “Administrative Wage Garnishment.” Accessed Jan. 30, 2025.
- Federal Student Aid, “Loan Rehabilitation Income and Expense.” Accessed Jan. 30, 2025.
- Consumer Finance Protection Bureau, “What laws limit what debt collectors can say or do?” Accessed Jan. 30, 2025.
- Upsolve, “Can I File Bankruptcy Even Though I’m Unemployed?” Accessed Jan. 30, 2025.
- Nolo, “Can You File Bankruptcy on Unemployment?” Accessed Jan. 30, 2025.
