Debts are a reality for many Australians. While most strive to meet their obligations, unforeseen circumstances can lead to debt accumulation. When repayment efforts fall short, creditors may resort to legal avenues like wage garnishment.  

If you’re facing this situation yourself or know someone who is, understanding the process empowers you to make the right financial decisions, seek appropriate help and protect yourself from unfair practices. This is why we created this guide.

What is wage garnishment?

Wage garnishment–also known as attachment of debt, warrant of redirection of earnings, or earning appropriation order–is a legal order where a court mandates your employer to allocate a part of your earnings or wages directly to a creditor as a means to pay off your debt. 

This typically happens when you haven’t kept up with payments for both personal debts like loans and credit card bills and government debts like taxes, and your creditor obtains a court judgement against you.

How does wage garnishment work?

The process of wage garnishment follows these steps:

• The creditor obtains a garnishee order from the court authorising wage deductions.
• The creditor serves the order to your employer, outlining the amount and duration of the deductions. Depending on your state or territory provisions, they may or may not inform you of the wage garnishment order. 
• Your employer deducts a portion of your wages as specified in the order, sending the funds directly to the creditor.

Your employer acts as a neutral third party in the process. They are legally obligated to comply with the garnishee order, deducting and forwarding the specified amount to the creditor. They cannot initiate wage garnishment themselves.

As the employee facing wage garnishment, you have certain rights, mainly:

• The right to receive a copy of the garnishee order from the creditor or court.
• The right to object to the order in court if you believe it’s unfair or exceeds legal limits.
• The right to seek legal advice to understand your options and potentially negotiate a settlement or payment plan with the creditor.

If you resign while facing wage garnishment, the garnishment doesn’t disappear with your job. Your creditor’s order likely extends beyond your employment, and your new employer might be obligated to comply, depending on your location. Be transparent and inform them about the existing garnishee order immediately.

As for the obligation to inform your creditors, there might be legal requirements for either you or your former employer to inform the creditor about your change in employment. Check your state’s or territory’s regulations to avoid legal issues.

What is the most wages that can be garnished?

All states and territories guarantee a minimum wage amount that garnishment cannot touch. This is to ensure you retain enough income for necessities. Here’s a breakdown by state:

• Australian Capital Territory: The maximum garnishment is 20% of disposable earnings.
• New South Wales: The minimum weekly income protected is $570.00 (as of this writing)
• Northern Territory: The court determines the garnishment amount, ensuring enough income for living expenses
• Queensland: The court decides the garnishment amount, considering factors like employment status, income, and expenses
• South Australia: The debtor should be left with at least 90% of the national minimum wage
• Tasmania: The general limit is 20% of wages or salary
• Victoria: Maximum garnishment is 20% of after-tax pay
• Western Australia: It depends on what the garnishment order is for. Here’s the list:
  • Standard: Larger of these two options:
    • 35x the federal minimum hourly wage
    • 75% of disposable earnings
  • Spousal maintenance: 50% of disposable earnings
  • Private student loan debt: Larger of these two options:
    • 50x the highest state minimum hourly wage
    • 85% of disposable earnings
  • Other consumer debt: Larger of these two options:
    • 35x the state minimum hourly wage
    • 80% of disposable earnings

If you have multiple wage garnishment orders, your employer must prioritise them according to the date they received each order. The order received first gets deducted first, then the second, and so on, until all your disposable income is exhausted. No matter the number of garnishment orders, your employers must ensure you retain the minimum weekly compensation amount mentioned for your state or territory.

If multiple orders exceed your remaining disposable income, your employer may need to consult legal professionals or the court for further guidance.

How to stop garnishee order

If you find yourself facing a garnishee order, you have several options:

• Settle the debt in its entirety. If you have personal savings or other sources of money, negotiate a lump sum payment with the creditor.
• Apply to pay the debt in instalments. Present the court with a realistic and affordable instalment plan to modify the garnishee order, allowing you to repay the debt gradually without wage deductions.
• Negotiate with creditors. You can negotiate a reduced payment plan or propose alternative repayment methods that prevent wage garnishment.

File for bankruptcy. In extreme situations where debt becomes insurmountable, filing for bankruptcy can offer a fresh start. But remember, this option comes with significant consequences, including asset liquidations and should be considered a last resort after exploring all other options.

How to prevent wage garnishment in the first place

You can avoid wage garnishment if you take these proactive measures:

• Manage your debts responsibly. Prioritise timely debt repayments to avoid accumulating arrears. Budgeting and financial planning can help you allocate resources effectively and prevent debt from spiralling out of control.
• Communicate with creditors. Inform them of any financial difficulties and explore alternative repayment options before the situation escalates to legal proceedings.
• Seek professional help. Early intervention from financial counsellors can assist you with debt management strategies, negotiation skills, and budget planning tools to prevent debt accumulation and potential wage garnishment.

Contact Us for Debt Help Today

Don’t let debt steal your peace. Contact us today for a free consultation. We offer practical debt solutions to help you get back on track.