Wage Garnishment on the Rise in the U.S.

Unpaid debt, college loans and taxes are not the main reason.

Wage garnishment hurts your budget

If you’re supporting children by court order, chances are you may be seeing less money in your paychecks. A new study reveals more than 40 percent of wage garnishments are related to child support – that’s compared to almost 20 percent for tax debts.

Child support is by far the number one cause of wage garnishment. Garnishment is defined as a forcible paycheck deduction used to pay off certain types of outstanding debt. Your wages can be garnished for unpaid tax debt, back child support and alimony, as well as federal student loan debt that’s in default.

This legal process is often a last resort for debt collection. Consumers facing garnishment have to deal with reduce income, which can make budgeting difficult and make bad financial situation even worse. Yet no one has studied it in depth until outsourcing firm ADP did so this month in a “first-of-its-kind” look at current trends.

Overall, “7.2 percent of U.S. workers studied have had their wages garnished,” ADP said. Interestingly, the numbers varied by region, with the Midwest having the highest rate at 8.9 percent and the Northeast having the lowest, at 4.9 percent.

“This disparity may be related to a higher concentration of manufacturing companies being located in the Midwest,” ADP said. Additional information includes:

  • A top garnishment rate of 10.5 percent “among employees age 35 to 44 – which is typically the age of peak debt load, child rearing and divorce.”
  • 48 percent of blue collar workers, such as manufacturing employees, have their paychecks garnished versus only 23 percent of white collar workers, such as education and health service employees.
  • The highest garnishment rate is found with workers making $25,000 to $39,999 a year.

Dealing with financial issues that lead to garnishment

Given the facts above, in many cases back child support may not be so much a product of deadbeat parents, as it is financial hardship. When you’re making less than $40,000 per year, it can be tough to just support yourself, let alone provide support for children.

With that in mind, Consolidated Credit is reaching out to parents who are struggling in order to help them develop a financial plan that helps them get on track. Although things like back child support can’t be consolidated, going through credit counseling may help struggling parents find ways to regain financial control. Often, reining in other debt like credit card debt can provide the breathing room needed to catch up on obligations like court-ordered support.

If you’re struggling with debt and facing wage garnishment, call us today for a Free Debt Analysis. We also offer specialized tools, including money strategies for single parents and personalized budgeting assistance.