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.
How Wage Assignment Works
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. 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 vs. Wage Garnishment
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: 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.
