What is the maximum percentage of an employee's disposable earnings that can be garnished to pay off debts?

The maximum percentage of an employee's disposable earnings that can be garnished to pay off debts is indeed 25%. This figure is established by federal law under the Consumer Credit Protection Act (CCPA), which sets limits on how much an employer can withhold from an employee's paycheck to satisfy garnishments such as those for child support, taxes, or other debts.

Disposable earnings refer to the amount left after mandatory deductions, such as taxes and Social Security contributions, have been taken out. According to the regulations, creditors can obtain a garnishment order that allows them to claim up to 25% of an employee’s disposable earnings. This limitation is in place to ensure that individuals still have sufficient income for basic needs, thereby protecting them from excessive financial hardship while still enabling creditors to collect debts owed.

Understanding this limit is crucial for payroll professionals, as it ensures compliance with federal regulations and helps prevent legal issues related to wage garnishment.