Wage Garnishment (Attachment of Earnings)
A legal process where part of your salary is withheld to repay a debt, leaving a protected minimum.
Wage garnishment, or attachment of earnings, lets a creditor with a court order collect a debt directly from your pay before you receive it. The law protects a non-attachable minimum so you can still cover basic living costs, and the rest above it is split according to set rules. It is a serious consequence of unpaid debts and can run for a long time until the debt is cleared. Communicating with creditors and seeking advice early can sometimes avoid it. Knowing your protected amount helps you budget through the process.
Example
If your protected minimum is $1,300 and you earn $2,100 net, a portion of the $800 above it can be withheld each month toward the debt.
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Related terms
Debt-to-Income Ratio
The percentage of your gross monthly income that goes toward debt payments, used by lenders to assess borrowing capacity.
Insolvency (Debt Relief)
A legal process for people who cannot repay their debts, leading to structured repayment or discharge.
Default Interest (Late Penalty)
Extra interest or a penalty charged when you pay a debt or bill late.
Debt Consolidation
Combining several debts into a single loan, ideally with a lower interest rate and one monthly payment.
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Financial Health Score
A composite metric that evaluates your overall financial well-being based on multiple factors like savings rate, debt levels, emergency fund, and spending habits.
Savings Rate
The percentage of income saved or invested rather than spent, widely considered the most important factor in building wealth.
Inflation
The rate at which the general price level of goods and services rises over time, reducing the purchasing power of money.
4% Rule
A retirement guideline suggesting you can withdraw 4% of your portfolio in the first year, adjusted for inflation thereafter, with low risk of running out.
Liquidity
How quickly and easily an asset can be turned into cash without losing value.