Wage assignments allow creditors to take money directly from an employee’s paycheck to pay off a debt. They are voluntary agreements between the employee and the creditor. Due to the fact that employees must sign documents authorizing a creditor to take money from their paycheck, wage assignments do not require court approval. These arrangements differ from wage garnishments, in which a creditor must go to court to obtain permission to collect part of a debtor’s wages. Moreover, the employee typically has the right to terminate the wage assignments, while one must go through a legal process to stop a wage garnishment.
The United States often uses wage assignments to collect child support payments. Wage assignments may also be utilized to pay off other debts such as unpaid taxes or loans.
Wage assignments are not regulated by federal law and therefore are not required to follow the Federal Consumer Credit Protection Act. The laws concerning wage assignment vary from state to state. Following are a few examples of restrictions in various states:
Wage assignments are undoubtedly a complicated subject. As a matter of fact, plenty of people are not aware of the differences between wage assignments and wage garnishments. Also, although wage assignments are voluntary, employees are not always aware that they agreed to them. Wage assignment provisions may be hidden among the fine print in consumer contracts and loan documents, and employees may not learn about these clauses until it is too late. This is why it is essential to hire proper legal representation to review important contracts before signing them. A seasoned attorney will be able to help you handle these complex arrangements.