Wage Assignment Overview

Usually, a creditor has to go to court to take part of your wages. This is called wage garnishment.

However, if you signed a form agreeing to a wage assignment, a creditor can take your wages without first going to court. You may agree to a wage assignment when you sign a loan contract. This allows your creditor to have money deducted from your wages if you don't pay.

Starting a Wage Assignment

You must be at least 40 days behind on your loan before the creditor can have your employer start taking money out of your paycheck.

First, the creditor must mail you and your employer a Notice of Intent to Assign Wages 20 days before they can make the demand. The notice has to be sent to you by certified or registered mail. You should receive advance warning that money will be deducted from your wages.

The notice must follow a specific form and must include the following information:

• be sent to you and your employer;
• be sent by registered or certified mail;
• inform you the creditor will demand part of your wages from your employer in 20 days;
• include a copy of the wage assignment; 
• tell you how much you owe; 
• include your options to respond to the notice; and
• include a revocation notice form.

The creditor then must send a demand letter to your employer. The demand must contain the correct amount in default and include a copy of the assignment. If the notice or demand does not follow the requirements of the law, they have no legal effect.

If you do not revoke the wage assignment, then 20 days later (once the loan is 40 days past due), your employer will start paying a portion of your paycheck to the creditor to pay off your debt.

Day One:
Loan is past due

Day 20:
Creditor sends notice

Day 40:
Wage assignment begins.

Amount of a Wage Assignment

The creditor may take from your paycheck whichever amount is less between the following two options:

• 15% of your total wages, salary, commission, and bonuses for any workweek; or
• The amount your take-home pay (after taxes and other withholdings) for a week is over $630 (which is 45 times the 2024 state minimum hourly wage).

That means that you can only have a wage assignment if you take home over $630 per week.

Stopping a Wage Assignment

You can stop a wage assignment at any time for any reason. If you don't want the deduction to happen, write a letter to your employer and creditor stating you are canceling the wage assignment. Remember, you will still owe the money. The creditor can use other methods to collect it. That probably means a court case, which may end with an involuntary wage garnishment.

Length of a Wage Assignment

A wage assignment is good for 3 years from the date you signed the wage assignment. But, if you changed jobs after you signed the wage assignment, the wage assignment is only good for 2 years from the date you signed the wage assignment.
 
If a creditor tries to collect money from your paycheck after the time period expires, you should talk to a lawyer. You might be able to sue the creditor in court.

Note: Child support and student loans can also result in garnishments without a court case.