APA Garnishments & Wage Deductions 2 — Questions and Answers
Question 1: Under the Debt Collection Improvement Act (DCIA), what is the maximum percentage of disposable pay that can be garnished for a federal student loan in default?
- 10%
- 15% (Correct answer)
- 20%
- 25%
Correct answer: 15%
The DCIA allows administrative wage garnishment for defaulted federal student loans of up to 15% of disposable pay, subject to the 30x minimum wage floor.
Question 2: When an employer receives an Income Withholding Order (IWO) for child support, within how many business days must the first withholding typically begin under the model federal form?
- Immediately upon receipt
- Within 7 business days
- On the first pay date occurring 14 or more days after receipt (Correct answer)
- Within 30 days
Correct answer: On the first pay date occurring 14 or more days after receipt
The standard IWO requires employers to begin withholding no later than the first pay period occurring on or after the date that is 14 business days after the IWO is received.
Question 3: Filing for Chapter 7 bankruptcy generally triggers an automatic stay. Which type of garnishment is typically NOT stopped by the bankruptcy automatic stay?
- Creditor wage garnishment
- Student loan administrative wage garnishment
- Domestic support obligations (child support/alimony) (Correct answer)
- State tax levy
Correct answer: Domestic support obligations (child support/alimony)
Domestic support obligations such as child support and alimony are exempt from the bankruptcy automatic stay under 11 U.S.C. § 362(b)(2) and must continue.
Question 4: An employer charges a $5 administrative fee per pay period for processing a child support income withholding order. How should this fee be applied?
- Added on top of the withheld child support amount paid to the state disbursement unit
- Deducted from the employee's wages in addition to the withheld support
- Paid by the custodial parent, not the employee
- Applied only if state law permits it; fee comes from the employee's remaining wages (Correct answer)
Correct answer: Applied only if state law permits it; fee comes from the employee's remaining wages
Employers may charge a reasonable administrative fee (allowed by state law) which is deducted from the employee's remaining disposable earnings after the support withholding.
Question 5: When an employer receives a tax levy from the IRS under a Form 668-W, what must the employer give the employee immediately?
- A copy of the levy notice and Publication 1494 exemption statement (Correct answer)
- A termination letter
- A Form W-2 for the current year
- A copy of the employer's garnishment policy
Correct answer: A copy of the levy notice and Publication 1494 exemption statement
Upon receiving Form 668-W, the employer must provide the employee with the statement of exemptions (Part 3 of the levy) and Publication 1494 so the employee can claim their exempt amount.
Question 6: What is the correct order of priority when an employee has simultaneous federal tax levy, child support withholding order, and creditor garnishment?
- Child support → Tax levy → Creditor garnishment (Correct answer)
- Tax levy → Child support → Creditor garnishment
- Creditor garnishment → Child support → Tax levy
- Tax levy → Creditor garnishment → Child support
Correct answer: Child support → Tax levy → Creditor garnishment
Child support and alimony orders take first priority, followed by federal tax levies, then creditor garnishments, under federal law.
Question 7: A voluntary wage assignment differs from a court-ordered garnishment in that:
- A wage assignment requires a court order while a garnishment does not
- A wage assignment is agreed to by the employee; a garnishment is compelled by legal process (Correct answer)
- A wage assignment is capped at 10% while a garnishment is capped at 25%
- Employers are never required to honor voluntary wage assignments
Correct answer: A wage assignment is agreed to by the employee; a garnishment is compelled by legal process
A voluntary wage assignment is the employee's own written authorization directing the employer to deduct and pay a creditor, whereas a garnishment is a court or agency order compelling the employer to withhold wages.
APA Garnishments & Wage Deductions 2
Under the Debt Collection Improvement Act (DCIA), what is the maximum percentage of disposable pay that can be garnished for a federal student loan in default?