CPS Garnishments & Levies 1 — Questions and Answers
Question 1: Which federal law governs the maximum amount that can be withheld from an employee's wages for a creditor garnishment?
- Fair Labor Standards Act (FLSA)
- Consumer Credit Protection Act (CCPA) (Correct answer)
- Employee Retirement Income Security Act (ERISA)
- Fair Debt Collection Practices Act (FDCPA)
Correct answer: Consumer Credit Protection Act (CCPA)
Title III of the Consumer Credit Protection Act (CCPA) sets federal limits on wage garnishment amounts and prohibits discharge of employees for a single garnishment.
Question 2: Under the CCPA, the maximum garnishable amount for ordinary consumer debt is the lesser of two figures. What are they?
- 10% of gross earnings OR earnings exceeding 25 times federal minimum wage
- 25% of disposable earnings OR the amount by which disposable earnings exceed 30 times the federal minimum hourly wage (Correct answer)
- 20% of net pay OR earnings exceeding 40 times state minimum wage
- 15% of gross earnings OR earnings exceeding 20 times the federal minimum wage
Correct answer: 25% of disposable earnings OR the amount by which disposable earnings exceed 30 times the federal minimum hourly wage
The CCPA limits ordinary garnishments to the lesser of 25% of disposable earnings or the amount exceeding 30 times the federal minimum wage per week.
Question 3: How are 'disposable earnings' defined for federal wage garnishment purposes?
- Gross wages before any deductions are taken
- Net take-home pay after all employer and voluntary deductions
- Earnings remaining after legally required deductions such as taxes and Social Security (Correct answer)
- Total compensation including tips, bonuses, and commissions only
Correct answer: Earnings remaining after legally required deductions such as taxes and Social Security
Disposable earnings are the portion of wages remaining after legally required deductions (taxes, Social Security, Medicare, state unemployment insurance) are subtracted; voluntary deductions do not reduce disposable earnings.
Question 4: Which type of garnishment order generally takes priority over all other garnishments when received simultaneously?
- Federal student loan administrative wage garnishments
- Creditor garnishments from court judgments
- Child support and alimony income withholding orders (Correct answer)
- State tax levies
Correct answer: Child support and alimony income withholding orders
Child support and alimony income withholding orders carry statutory priority under federal law and must be satisfied before most other garnishment types.
Question 5: What is an IRS wage levy?
- A court-ordered voluntary payment plan negotiated with the IRS
- The IRS's legal seizure of wages to satisfy an unpaid federal tax debt (Correct answer)
- A penalty assessed for late payroll tax deposits
- A lien placed on an employee's future property only
Correct answer: The IRS's legal seizure of wages to satisfy an unpaid federal tax debt
An IRS wage levy is a legally enforceable seizure of an employee's wages to satisfy an outstanding federal tax liability, and it continues until the debt is paid or released.
Question 6: Under federal law, an employer is prohibited from discharging an employee whose wages are garnished for:
- Any garnishment, regardless of the number or type
- A single debt, but not for multiple simultaneous garnishments (Correct answer)
- Only child support garnishments
- Only IRS tax levies
Correct answer: A single debt, but not for multiple simultaneous garnishments
The CCPA protects employees from termination when their wages are subject to garnishment for one debt, but this protection does not extend to employees garnished for two or more separate debts.
Question 7: Upon receiving a valid garnishment order, what is the employer's initial required action?
- Contact the creditor to dispute the order before withholding anything
- Notify the employee and begin withholding as directed by the order (Correct answer)
- Return the order to the court for verification
- Withhold funds but wait 30 days before remitting to allow the employee to object
Correct answer: Notify the employee and begin withholding as directed by the order
Employers must notify the affected employee that a garnishment order has been received and begin withholding in accordance with the order's terms in a timely manner.
CPS Garnishments & Levies 1
Which federal law governs the maximum amount that can be withheld from an employee's wages for a creditor garnishment?