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What Is Wage Assignment?

Definition and example of wage assignment, how wage assignment works, wage assignment vs. wage garnishment.

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A wage assignment is when creditors can take money directly from an employee’s paycheck to repay a debt.

Key Takeaways

• A wage assignment happens when money is taken from your paycheck by a creditor to repay a debt.
• Unlike a wage garnishment, a wage assignment can take place without a court order, and you have the right to cancel it at any time.
• Creditors can only take a portion of your earnings. The laws in your state will dictate how much of your take-home pay your lender can take.

A wage assignment is a voluntary agreement to let a lender take a portion of your paycheck each month to repay a debt. This process allows lenders to take a portion of your wages without taking you to court first.

Borrowers may agree to allow a lender to use wage assignments, for example, when they take out payday loans . The wage assignment can begin without a court order, although the laws about how much they can take from your paycheck vary by state.

For example, in West Virginia, wage assignments are only valid for one year and must be renewed annually. Creditors can only deduct up to 25% of an employee’s take-home pay, and the remaining 75% is exempt, including for an employee’s final paycheck.

If you agree to a wage assignment, that means you voluntarily agree to have money taken out of your paycheck each month to repay a debt.

State laws govern how soon a wage assignment can take place and how much of your paycheck a lender can take. For example, in Illinois, you must be at least 40 days behind on your loan payments before your lender can start a wage assignment. Under Illinois law, your creditor can only take up to 15% of your paycheck. The wage assignment is valid for up to three years after you signed the agreement.

Your creditor typically will send a Notice of Intent to Assign Wages by certified mail to you and your employer. From there, the creditor will send a demand letter to your employer with the total amount that’s in default.

You have the right to stop a wage assignment at any time, and you aren’t required to provide a reason why. If you don’t want the deduction, you can send your employer and creditor a written notice that you want to stop the wage assignment. You will still owe the money, but your lender must use other methods to collect the funds.

Research the laws in your state to see what percentage of your income your lender can take and for how long the agreement is valid.

Wage assignment and wage garnishment are often used interchangeably, but they aren’t the same thing. The main difference between the two is that wage assignments are voluntary while wage garnishments are involuntary. Here are some key differences:

Once you agree to a wage assignment, your lender can automatically take money from your paycheck. No court order is required first, but since the wage assignment is voluntary, you have the right to cancel it at any point.

Wage garnishments are the results of court orders, no matter whether you agree to them or not. If you want to reverse a wage garnishment, you typically have to go through a legal process to reverse the court judgment.

You can also stop many wage garnishments by filing for bankruptcy. And creditors aren’t usually allowed to garnish income from Social Security, disability, child support , or alimony. Ultimately, the laws in your state will dictate how much of your income you’re able to keep under a wage garnishment.

Creditors can’t garnish all of the money in your paycheck. Federal law limits the amount that can be garnished to 25% of the debtor’s disposable income. State laws may further limit how much of your income lenders can seize.

Illinois Legal Aid Online. “ Understanding Wage Assignment .” Accessed Feb. 8, 2022.

West Virginia Division of Labor. “ Wage Assignments / Authorized Payroll Deductions .” Accessed Feb. 8, 2022.

U.S. Department of Labor. “ Fact Sheet #30: The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title III (CCPA) .” Accessed Feb. 8, 2022.

Sacramento County Public Law Library. “ Exemptions from Enforcement of Judgments in California .” Accessed Feb. 8, 2022.

District Court of Maryland. “ Wage Garnishment .” Accessed Feb. 8, 2022.

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What Is a Wage Assignment?

How wage assignment works.

• Why Are Wage Assignments Voluntary?

Wage Garnishment

The bottom line.

• Credit & Debt
• Debt Management

Wage Assignment: What It Means, How It Works

Wage assignment is the act of taking money directly from an employee's paycheck in order to pay back a debt obligation. Such an automatic withholding plan may be used to pay back a variety of debt obligations, including back taxes, defaulted student loan debt, and both child and spousal support payments.

Key Takeaways

• A wage assignment takes funds directly from an employee's paycheck to pay back a debt.
• How wage assignments are regulated varies by state, with some states even allowing for voluntary child support agreements.
• A wage garnishment is an involuntary deduction and requires a court order.

Wage assignments are typically incurred for debts that have gone unpaid for a prolonged period of time. Employees may sometimes opt for a voluntary wage assignment to pay for things like union dues or to contribute to a retirement fund.

A wage assignment is processed as part of an employer's payroll procedure. The employee's paycheck is decreased by the amount of the assignment and noted on their pay stub.

A wage assignment is often a lender's last resort to receive repayment from a borrower who has previously failed to pay a debt obligation.

Wage assignments are a valuable tool for collecting unpaid debts, but unfortunately, they may be associated with abusive lending practices . If you're struggling with your debt, one of the best debt relief companies or credit counseling agencies may be able to help you get back on track before a wage assignment is incurred.

What Makes Wage Assignments Voluntary?

In a voluntary wage assignment, a worker essentially asks their employer to withhold a portion of their paycheck and send it to a creditor to pay off a debt. Loan agreements may sometimes include a voluntary wage assignment clause in their terms should the borrower default on their loan.

Payday lenders often include voluntary wage assignments into their loan agreements to better their chances of being repaid. Laws regarding wage assignments vary by state.

For example, in West Virginia, wage assignments are capped at 25% of a worker's take-home earnings, the employee and the employer must sign the agreement, and agreements must be renewed annually. Under Illinois law, a lender cannot resort to wage assignment until a debt is 40 days in default. The wage assignment cannot continue for more than three years, and the worker can stop the wage assignment at any time.

Involuntary wage deductions, known as wage garnishments , require a court order and are most likely to be employed to collect spousal and child support payments that have been ordered by a court. Wage garnishments may also be used to collect unpaid court fines or student loans that have been defaulted on.

Several states allow individuals to sign up for voluntary child support agreements. In such a case, both parents must agree to a plan. Once that happens, a voluntary wage assignment may begin. If a child support or welfare agency is involved, they would have to approve any plan.

How Long Can I Have a Wage Assignment?

Since wage assignments are voluntary, the length of time that you use one can vary. Some loans include a wage assignment agreement, so you'll have to check the language of your loan to determine your obligation. Each state also has its own regulations regarding wage assignments.

How Much of My Income Can Go to Wage Assignments?

Every state has its own regulations, but typically 15–25% of your disposable income can be designated for wage assignments.

Is Wage Garnishment the Same as Wage Assignment?

While they are similar, wage garnishment and assignment are not the same. Wage garnishment is an involuntary paycheck deduction, typically ordered to repay child support, student loans, tax debt, or bankruptcy. A wage assignment is voluntary and may be used to repay a consumer debt.

Wage assignments may be a useful tool to help you pay down a debt. Wage assignments are voluntary but they may be hidden in the fine print of some loan products, so read everything carefully before signing. Check the regulations in your state to determine if your wage assignment is revocable.

West Virginia Division of Labor. " Wage Payment and Collection (WPC) Act: Payroll Deductions and Wage Assignments ," Page 3.

Illinois General Assembly. " (740 ILCS 170/) Illinois Wage Assignment Act ."

U.S. Department of Labor. " Fact Sheet #30: The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title III (CCPA) ."

Illinois Legal Aid. " Understanding Wage Assignment ."

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To use this program, you must be trying to stop a person or creditor from taking money out of your paycheck based on a wage assignment agreement. This program cannot be used for wage garnishment.

Learn more about stopping a wage assignment  and the difference between wage assignment and wage garnishment .

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2023 Illinois Compiled Statutes Chapter 740 - CIVIL LIABILITIES 740 ILCS 170/ - Illinois Wage Assignment Act.

(740 ILCS 170/.01) (from Ch. 48, par. 39.01)

Sec. .01. Short Title. This Act shall be known and may be cited as the Illinois Wage Assignment Act.

(Source: P.A. 83-867.)

(740 ILCS 170/1) (from Ch. 48, par. 39.1)

Sec. 1. No assignment of wages earned or to be earned is valid unless

(1) Made in a written instrument (a) signed by the wage-earner in person and (b) bearing the date of its execution, the social security number of the wage-earner, the name of the employer of the wage-earner at the time of its execution, the amount of the money loaned or the price of the articles sold or other consideration given, the rate of interest or time-price differential, if any, to be paid, and the date when such payments are due;

(2) Given to secure an existing debt of the wage-earner or one contracted by the wage-earner simultaneously with its execution;

(3) An exact copy thereof is furnished to the wage-earner at the time the assignment is executed;

(4) The words "Wage Assignment" are printed or written in bold face letters of not less than 1/4 inch in height at the head of the wage assignment and also one inch above or below the line where the wage-earner signs that assignment;

(5) Written as a separate instrument complete in itself and not a part of any conditional sales contract or any other instrument.

The requirement of the social security number of the wage-earner imposed by this Act applies only as to wage assignments made after January 1, 1966.

(Source: Laws 1967, p. 2049.)

(740 ILCS 170/2) (from Ch. 48, par. 39.2)

Sec. 2. Demand on an employer for the wages of wage-earner by virtue of a wage assignment may not be served on the employer unless:

• (1) There has been a default of more than 40 days in payment of the indebtedness secured by the assignment and the default has continued to the date of the demand;
• (2) The demand contains a correct statement as to the amount the wage-earner is in default and the original or a copy of the assignment is exhibited to the employer; and
• (3) Not less than 20 days before serving the demand, notice required under Section 2.2 has been served upon the employee, and an advice copy sent to the employer, by 2 methods: (i) first class mail; and (ii) registered or certified mail.

Service of any demand without complying with this Section has no legal effect. Proof of certified mail is prima facie evidence of service.

A demand under this Section applies only to wages due at the time of service of the demand and upon subsequent wages until the total amount due under the assignment is paid, or, if the wage assignment is revocable under federal law, until the employee revokes it.

(Source: P.A. 99-903, eff. 1-1-17.)

(740 ILCS 170/2.1) (from Ch. 48, par. 39.2a)

Sec. 2.1. A demand shall be in the following form:

"Demand is hereby made upon an assignment of salary, wages, commissions or other compensation for services, executed by .... and delivered to .... on (insert date), to secure a debt contracted on (insert date).

The total amount of the debt is $..... Payments in the amount of $.... have been made. The duration of the contract is .... months. There is now due and owing without acceleration the sum of $...., the last payment having been made on (insert date).

The employee herein named has been in default in his payments in the amount of $...., of which $.... has been due and owing for more than 40 days.

Unless you have received a written notice from the employee herein named revoking the wage assignment, you are required by law to make payment in accordance with such assignment. ...., first being duly sworn, deposes and says that the facts stated in the demand above are true and correct; and further deposes and says that he (or his principal, if he is an agent for the assignee) has not received notice from the debtor that he or she is revoking the wage assignment.

Payments must be made until the total amount due under the assignment is paid or until the employee revokes the wage assignment............................

Subscribed and sworn to before me on (insert date). ........................... Notary Public".

(740 ILCS 170/2.2) (from Ch. 48, par. 39.2b)

Sec. 2.2. Forms; notice of intent to assign wages; revocation.

(a) The notice to an employee required by Section 2 shall be in the following form: "NOTICE OF INTENT TO ASSIGN WAGES

This notice is required by the Illinois Wage Assignment Act. The notice has been sent to tell you that a creditor (name and address listed below) plans to have your wages assigned. A wage assignment is a document you signed at the time you signed the contract for your debt. It authorizes your creditor to receive a portion of your wages directly from your employer, in order to pay your debt. This notice contains important information about the debt and what your options are. You should read the entire notice carefully. WHY THE CREDITOR WANTS TO ASSIGN YOUR WAGES

You signed a wage assignment on ....... (date) ....... The wage assignment was signed as security if you failed to make payment on the contract you signed on ......... (date) .......... A copy of the wage assignment is attached. The creditor's records show that you have not made a payment since ......... (date) ....... and that you now owe $........ on the contract. The creditor will send a demand for wages to your employer 20 days from the date you receive this.

The creditor's name, address, and phone number are: ...................... ...................... ...................... ...................... (Signed by)"

(b) If the wage assignment is revocable under federal law, the notice required under subsection (a) shall also include the following: UNDERSTANDING YOUR CHOICES UNDER THE ILLINOIS WAGE ASSIGNMENT ACT

There are options available to you in this process. You should consider your options and determine the one that is best for you. You have the right to contact an attorney at any point concerning the wage assignment, or to help you determine your best option.

Your options include:

• (1) You can stop the wage assignment at any time, which will stop your wages from being deducted. It will not eliminate your debt, and interest may continue to accrue. You may contact your creditor for more information about the interest rate on your contract, and to determine how much interest might accrue if you stop the wage assignment.
• Your creditor will still be able to pursue other means of collecting any debt you may owe, including filing a lawsuit against you for the full amount owed under the contract and any interest that might accrue. A lawsuit might result in you owing legal fees and other costs.
• You can stop the wage assignment by filling out the enclosed Revocation Notice Form, or by writing a letter stating that you are revoking the wage assignment. Send the Revocation Notice Form or letter by registered or certified mail to the creditor, at the address listed above. It is highly recommended that you give a copy of the Revocation Notice Form or letter to your employer so your employer can stop any pending payments.
• If you choose to write a letter, it should be addressed to the creditor, and should include:
• (i) your name;
• (ii) the account number; and
• (iii) a statement that you are revoking the wage assignment, such as, "I am revoking the wage assignment."
• Even if the wage assignment has already begun, you can still stop it now or at any point in the future.
• (2) You can do nothing, and allow the wage assignment process to proceed. Starting in 20 days, part of your wages will be sent directly to the creditor to pay off your debt. This will reduce your take-home pay every pay period until the total amount of the debt is repaid.
• Up to 15% of your wages will be sent to the creditor every pay period. Once the total amount is repaid, the creditor will send a notice to you and to your employer that includes the creditor's name, your name, and the account number, stating that the wage assignment is closed and no further wages should be assigned.
• (3) You can contact your creditor to repay the debt, or to explore other options, including a repayment plan or refinancing, if available. You can contact your creditor at the address and phone number listed above.
• If you agree on another repayment option with your creditor, the creditor will send a notice to your employer stating that your wages should not be assigned.

......................

The creditor's name and address are:

Re: (insert account number)

I, (insert name), hereby revoke the wage assignment I signed on (insert date the wage assignment was signed). You no longer have my permission to use this wage assignment.

(Signed by)

(740 ILCS 170/3) (from Ch. 48, par. 39.3)

Sec. 3. No assignment of wages shall become invalid by reason of cessation of employment but shall be valid and collectible against any future employer of the wage-earner within a period of 2 years from the date of its execution.

(Source: Laws 1961, p. 1891.)

(740 ILCS 170/4) (from Ch. 48, par. 39.4)

Sec. 4. The maximum wages, salary, commissions, and bonuses that may be collected by an assignee for any work week shall not exceed the lesser of (1) 15% of such gross amount paid for that week or (2) the amount by which disposable earnings for a week exceed 45 times the Federal Minimum Hourly Wage prescribed by Section 206(a)(1) of Title 29, U.S.C., as amended, or the minimum hourly wage prescribed by Section 4 of the Minimum Wage Law, whichever is greater, in effect at the time the amounts are payable. This provision (and no other) applies irrespective of the place where the compensation was earned or payable and the State where the employee resides. No amounts required by law to be withheld may be taken from the amount collected by the creditor. The term "disposable earnings" means that part of the earnings of any individual remaining after the deduction from those earnings of any amounts required by law to be withheld. If there is more than one assignment demand received by the employer, the assignees shall collect in the order or priority of service of the demand upon the employer, but the total of all collections shall not exceed the amount that could have been collected if there had been one assignment demand.

Benefits and refunds payable by pension or retirement funds or systems, any assets of employees held by those funds or systems, and any moneys an employee is required to contribute to those funds or systems are exempt and are not subject to a wage assignment under this Act.

A fee of $12 for each wage assignment shall be collected by and paid to the employer and the amount so paid shall be credited against the amount of the wage-earner's outstanding debt.

(Source: P.A. 94-305, eff. 7-21-05.)

(740 ILCS 170/4.1) (from Ch. 48, par. 39.4a)

Sec. 4.1. Revocation of wage assignment. If the wage assignment is revocable under federal law, the employee may revoke the wage assignment at any time by submitting the Revocation Notice Form as provided in subsection (c) of Section 2.2 of this Act or otherwise providing written notice of revocation to the creditor. Revocation is effective regardless of how the creditor receives it. Failure to use the sample language provided in the notice described in Section 2.2 does not affect the validity of the written notice of revocation. The employee may submit a copy of the notice to his or her employer. If the written notice of revocation is served upon the creditor prior to the creditor's service of demand upon the employer, the demand shall not be served.

(740 ILCS 170/4.2) (from Ch. 48, par. 39.4b)

Sec. 4.2. If the employee has not served a Revocation Notice Form as provided in Section 4.1 of this Act or has not otherwise served the creditor with a written notice of revocation (if the wage assignment is revocable under federal law) as provided in this Act within 20 days after receiving the notice of intention to make a demand, the creditor may proceed with his demand, and the employer shall commence payment to the creditor not sooner than 5 business days after service of such demand, if no revocation notice has been received by the employer. If the employee cures the default stated in the demand or revokes the wage assignment, the creditor shall notify the employer and release the demand. No employer shall be liable for payments made in compliance with this Section.

If a Revocation Notice Form as set forth in Section 4.1 of this Act or other written notice of revocation from the employee is received by an employer, no wages are subject to a demand served by the creditor for that wage assignment and the employer shall cease any deduction of wages currently taking place for that wage assignment, unless the employer receives a copy of a subsequent written agreement between the creditor and employee authorizing such payments. If such an agreement is not reached, the creditor may not institute further proceedings on the wage assignment.

(740 ILCS 170/4.3) (from Ch. 48, par. 39.4c)

Sec. 4.3. If any person wrongfully: (1) serves a notice on an employee or serves a notice which does not conform with the requirements of Section 2.2, (2) causes a demand to be served for the wages of an employee, or (3) fails to release a demand, he shall be liable to the employee and the employer for statutory damages in the sum of $500 and all actual damages occasioned by such action including reasonable attorney's fees.

(740 ILCS 170/5) (from Ch. 48, par. 39.5)

Sec. 5. A discharge in bankruptcy shall be a valid defense to any suit brought upon a wage assignment executed by the bankrupt prior to the adjudication in bankruptcy; no assignment of wages shall be valid after three years from the date of its execution and shall be void after such period of three years.

(Source: Laws 1935, p. 208.)

(740 ILCS 170/6) (from Ch. 48, par. 39.6)

Sec. 6. Any person who wilfully and wrongfully serves a demand as assignee for wages when no assignment has been made to him or under an assignment which is invalid as provided by this Act knowing such assignment to be invalid with intent to obtain for himself or any other person the wages of an employee, is guilty of a petty offense.

(Source: P.A. 77-2422.)

(740 ILCS 170/7) (from Ch. 48, par. 39.7)

Sec. 7. If any of the provisions of this Act are unconstitutional it is the intent of the General Assembly that so far as possible the remaining provisions of the Act be given effect.

(740 ILCS 170/8) (from Ch. 48, par. 39.8)

Sec. 8. Nothing herein contained shall be construed as making invalid any assignment of wages executed prior to July 1, 1935.

(740 ILCS 170/9) (from Ch. 48, par. 39.10)

Sec. 9. All wages, salary amounts or other compensation paid by the State, any unit of local government or school district to any of its employees are exempt and not subject to collection under a wage assignment.

(Source: P.A. 79-502.)

(740 ILCS 170/10) (from Ch. 48, par. 39.11)

Sec. 10. No employer may discharge or suspend any employee by reason of the fact that his earnings have been subjected to wage demands on his employer for any indebtedness. Any person violating this Section shall be guilty of a Class A misdemeanor.

(740 ILCS 170/11) (from Ch. 48, par. 39.12)

Sec. 11. The provisions of this Act do not apply to orders for withholding of income entered by the court under provisions of The Illinois Public Aid Code, the Illinois Marriage and Dissolution of Marriage Act, the Non-Support of Spouse and Children Act, the Non-Support Punishment Act, the Revised Uniform Reciprocal Enforcement of Support Act, the Illinois Parentage Act of 1984, and the Illinois Parentage Act of 2015 for support of a child or maintenance of a spouse.

(Source: P.A. 99-85, eff. 1-1-16.)

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How Can I Stop a “Voluntary Wage Assignment”?

Home » Blog » How Can I Stop a “Voluntary Wage Assignment”?

Posted in Creditor Actions

By J. Douglas Hoyes, CA, LIT

Reading time: 3 minutes

Some lenders require their borrowers to sign a form called a “Voluntary Wage Assignment” which allows the borrower’s wages to be garnisheed if they do not repay the loan as agreed.  Payday loan companies and Credit Unions commonly ask borrowers to sign these types of forms. However not all wage assignment agreements are enforceable by law.

A voluntary wage assignment is an agreement between a debtor and a creditor which allows an amount to be deducted from the borrower’s wages to repay a debt. When a loan is in default, a signed wage assignment form is sent to the borrower’s employer requesting the company begin withholding an agreed amount from their wages and remit this amount to the creditor.

I am often asked if it is possible to stop a voluntary wage assignment without declaring personal bankruptcy. Here are the facts:

• In order to garnishee your wages in Ontario, a creditor must take you to court and sue you, and then obtain a Garnishment Order from the court.
• The only exceptions are a Credit Union to whom you have given an assignment of wages, or Canada Revenue Agency.
• In Ontario, Section 7 of the Ontario Wages Act specifically prohibits the assignment of wages to secure payment of a debt except in the case of a Credit Union.
• If any other creditor has not taken you to court, and has not obtained a Garnishment Order, the only way that the voluntary wage assignment can be enforced is if you consent to the employer garnisheeing your wages.

What that means is that only a Credit Union is legally able to enforce a wage assignment agreement in Ontario.  You can ‘un’-volunteer yourself from a voluntary wage assignment with a payday loan company or any creditor other than a Credit Union .

While generally, you can ask your employer to stop a voluntary wage assignment, the wage assignment may be a symptom of a greater financial problem and if you have received a legal garnishment order, there are options to stop a wage garnishment .

Can payday loan companies garnish your wages?

Payday loan companies often ask you to sign a voluntary wage assignment as part of the loan process. However these voluntary assignments are unenforceable.  Even though you have signed the voluntary wage assignment form, the form is not legally binding in Ontario; you can instruct your employer to not enforce it, and your employer is required to do as you ask.

Payday loan companies can, however, still go to court if they wish and obtain a legal garnishment order. If they, or any creditor, has obtained a court order granting them permission to garnish your wages, then your employer is required to comply.

If you are having problems meeting your financial obligations, please contact us to arrange a no charge consultation with one of our professionals to talk about your debt relief options.

Similar Posts:

• Wage Garnishing: Know Your Rights
• Stopping A Wage Garnishment with a Consumer Proposal
• How do I Stop a Wage Garnishment by Making a Deal with My Creditor?
• How to Stop a CRA Wage Garnishment
• What to Do When Creditors Threaten Legal Action

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Wage assignment and employers’ responsibilities

Tough economic times raise some tricky HR issues—for example, when an employee’s financial straits begin to affect his employer.

Must we honor a payday loan wage assignment?

Q. An employee borrowed money from a payday loan service at a very high interest rate that I feel is unfair. The payday loan service sent me a “wage assignment” notice and told me that our company must withhold money from his paychecks.  What is a wage assignment, and does our company actually have to honor it? A. A wage assignment is a document that allows a creditor to attach part of the employee’s wages if the employee fails to pay a specific debt. The creditor does not have to obtain a judgment in a court proceeding before requesting payment. Under the Illinois Wage Assignment Act (740 ILCS 170), private employers are obligated to honor a creditor’s properly served demand for a valid wage assignment, unless an employee presents a timely, valid , written defense to the wage assignment.

What constitutes a valid assignment?

Q. How can I tell if a wage assignment is valid? How long is it valid? A. A valid wage assignment document must have the words “Wage Assignment” printed or written in boldface letters of not less than ¼ inch in height at the head of the wage assignment and one inch above or below the line where the employee signs the assignment. The employee must have signed the document in person, and the document must show the date of execution, the employee’s Social Security number, the name of the employer at the time of execution, the amount of money loaned or the price of the articles sold or other consideration given, the rate of interest or time-price differential to be paid, if any, and the date on which such payments are due. A wage assignment is valid for no more than three years after the employee signs it and the employer’s name appears on it. If the employee changes jobs, the wage assignment is valid for two years, even though the new employer’s name does not appear on the assignment.

Handling wage assignments

Q. How does the wage assignment process start? A. Assuming that the wage assignment document complies with the formal requirements, the creditor must serve “demand to withhold” on the employer. The demand is valid only if:

The employee has defaulted on the debt secured by the assignment for more than 40 days, and the default has continued to the date of the demand.

The demand contains a correct statement of the amount the employee is in default, and the creditor provides an original or a photocopy of the assignment to the employer.

The creditor has served a “notice of intention to make the demand” upon the employee, with a copy to the employer, by registered or certified mail not less than 20 days before serving the demand.

Putting on the brakes

Q. Can an employee stop the wage assignment process? A. The employee does have a right to contest the demand. If an employee has a legal defense to the wage assignment, the employee may—within 20 days after receiving a notice of demand or within five days after the employer is served with the demand—notify the employer, in writing, of any defense to the wage assignment and send a copy of the written defense to the creditor by registered or certified mail.   As a result, the employee’s wages are not subject to a demand served by the creditor unless the employer receives a copy of a subsequent written agreement between the creditor and the employee authorizing such payments. Similarly, if the creditor receives a copy of the defense prior to serving its demand upon the employer, the creditor may not serve the demand upon the employer.  Whether the employee’s defense is legally valid is not an issue the employer must resolve. Instead, the employee and the creditor may attempt to reach another agreement or the creditor may simply bring a separate lawsuit against the employee to collect an outstanding debt. 

Calculating the wage assignment payment

Q. How much must the employer withhold—and when? A. The employer must begin payment to the creditor no sooner than five business days after service of such a demand.  The employer must withhold the lesser of:

15% of weekly gross wages

The amount by which the disposable earnings for a week (pay remaining after federal and state taxes, Social Security deductions and any other amounts required by law to be withheld, including required retirement contributions) exceed 45 times the federal minimum wage, unless a notice of defense is received within that five-day period.

The employer shall be paid a fee of $12 for each wage assignment. That $12 is credited against the debt.

WHAT TO READ NEXT

Voluntary Wage Assignments and Why You Should Avoid Them At All Costs

You would never hand over your paycheck to a creditor, would you?  Of course if you were under threat or order by a court you may hand over your paycheck; but never voluntarily. Right? Well, surprisingly many debtors do just that when they agree to “voluntary wage assignments.” A voluntary wage assignment is an agreement between a creditor and debtor that says the lender can deduct a certain amount of money from the debtor’s paycheck to repay a loan.

Voluntary wage assignments are commonly used by payday lenders. Surprised? You shouldn’t be.  Payday lenders understand that the reason debtors use their “services” is because they are financially strapped and desperate for cash.  But because their interest rates and fees are astronomically high, most debtors experience “payment shock” and may try to avoid paying them when the bill is due. So to protect their interests in the loan, payday lenders are now using voluntary wage assignments to increase their chances of getting paid.

How Voluntary Wage Assignment  Works

A voluntary wage assignment works just like a wage garnishment , except that the debtor has agreed to it. If a debtor defaults on the payday loan, the lender can then garnish the debtor’s wages without going to court. Once a debtor defaults on their payday loan, the lender will send the debtor a notice informing them that they plan to implement the voluntary wage assignment (i.e. wage garnishment).  This usually happens 20 days before the wage assignment notice is sent to the employer.   A wage assignment is valid for up to 3 years . In other words, the payday lender could technically garnish your wages for 3 years or until the loan is repaid.

For obvious reasons, agreeing to a wage assignment isn’t smart. You give the payday lender access to your wages and make it easier for them when you are not legally required to do so.  Signing a voluntary wage assignment can place you and your family in dire straits, if the lender garnishes wages that you need for your mortgage/rent, food and medical care. If you have signed a voluntary wage garnishment, you can revoke the agreement by sending the lender a letter.  Remember, Payday Loans are Dischargeable in Bankruptcy

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