Garnishment

DEFINITION of 'Garnishment'

A legal process whereby payments towards a debt owed by an individual can be paid by a third party - which holds money or property that is due to the individual - directly to the creditor. The third party in such a case is generally the individual's employer and is known as the garnishee. Garnishments are typically used for debts such as unpaid taxes, monetary fines and child support payments.

BREAKING DOWN 'Garnishment'

For example, if John Smith owes $10,000 in unpaid taxes that have been overdue, the IRS can resort to garnishment of his wages. The IRS would then direct Smith's employer to remit a portion of his salary for a certain amount of time, until Smith has paid off his taxes in full. Garnishments can have a negative impact on one's credit rating.

RELATED TERMS
  1. W-2 Form

    The W-2 form reports an employee's annual wages and the amount ...
  2. Withholding Allowance

    An allowance an individual claims on a W-4 Form. A withholding ...
  3. Creditor

    An entity (person or institution) that extends credit by giving ...
  4. Withholding Tax

    1. Income tax withheld from employees' wages and paid directly ...
  5. Gross Income

    1. An individual's total personal income, before accounting for ...
  6. Withholding

    The portion of an employee's wages that is not included in his ...
Related Articles
  1. Taxes

    Before You Visit Your Tax Preparer: Do This

    The earlier you start preparing your tax records and documents, the more likely you are to have a smooth tax return experience – and all the tax benefits you're due.
  2. Credit & Loans

    Fighting Back Against Collection Lawsuits

    There are still options available to those being pursued by a creditor.
  3. Personal Finance

    Outfox The Debt Collector's Hounds

    Dealing with a collection agency is scary if you don't know your rights. We help you take back the power.
  4. Taxes

    Surviving The IRS Audit

    Keeping thorough records and knowing the penalties make this experience easier than you'd expect.
  5. Taxes

    Top 9 Solutions To An Unexpected Tax Bill

    Finding out you owe when you expected a refund is a nasty shock. Find out how to cope.
  6. Taxes

    IRS Asset Seizures: Could It Happen To You?

    If you can't pay your taxes, know that the IRS has many avenues for collecting what you owe.
  7. Budgeting

    Got a Raise? 7 Smart Things to Do With It

    If you get a raise and spend all of it each month, from a wealth-building perspective you didn’t get a raise at all. Make that extra money work for you.
  8. Personal Finance

    Salary Negotiation Strategies That Can Backfire

    While you want the best salary you can get, failing to understand when, how, and why to negotiate may lead to undesirable results.
  9. Professionals

    Career Advice: Financial Analyst Vs. Business Analyst

    Understand the key distinctions between a financial analyst and a business analyst, and learn what each career offers in terms of starting pay and job outlook.
  10. Professionals

    Internal Advisor Consultant: Job Description & Average Salary

    Learn about the internal advisor consultant position and the national average salary as well as the key skills, education and experience needed.
RELATED FAQS
  1. Can a 401(k) be taken in bankruptcy?

    The two most common types of bankruptcy available to consumers are Chapter 7 and Chapter 13. Whether you file a Chapter 7 ... Read Full Answer >>
  2. Can the IRS garnish your wages?

    The IRS can garnish wages if back taxes are owed, and unlike with other creditors, prior judgment is not necessary. An IRS ... Read Full Answer >>
  3. How does a cost-of-living adjustment (COLA) affect my salary?

    Some companies build salary adjustments into their compensation structures to offset the effects of inflation on their employees. ... Read Full Answer >>
  4. Does working capital include salaries?

    A company accrues unpaid salaries on its balance sheet as part of accounts payable, which is a current liability account, ... Read Full Answer >>
  5. Do financial advisors need to meet quotas?

    Most financial advisors are required to meet quotas, particularly if they work for firms that pay base salaries or draws ... Read Full Answer >>
  6. What is the difference between AGI (adjusted gross income) and gross income?

    In the United States, individuals pay taxes based on their adjusted gross income, or AGI, rather than their gross income. ... Read Full Answer >>
Hot Definitions
  1. Short Selling

    Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is ...
  2. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  3. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  4. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  5. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  6. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center