If you live or work in Colorado and have unpaid debts, your creditors may use garnishment as a means of collecting what you owe. Creditors must follow all the state's garnishment guidelines, which in many cases requires them to sue you and obtain a judgment in court before your employer is obligated to withhold a portion of your wages. Although creditors commonly go after your wages, bank accounts and other receivables can be garnished as well.
Colorado Procedure for Garnishments
To collect on most consumer debts, such as an unpaid credit card or personal bank loan, Colorado requires creditors to go through the courts. As a result, your creditor must file a lawsuit against you first. If this occurs, you will receive notice in the form of a summons and complaint -- the initial document that outlines the amount you owe. At this stage, you can dispute the debt and raise any defenses you have to what is alleged in the complaint. Only if a creditor sufficiently shows that the debt is valid and obtains a judgment against you can it garnish your wages and bank accounts.
Limits on How Much Can Be Garnished
Colorado generally limits the amount of weekly wages that are subject to garnishment to a portion of your disposable earnings -- your total weekly earnings minus certain deductions required by law, such as court-ordered child support, Social Security, Medicare and income taxes that are withheld from your paycheck.
Under Colorado law, the maximum amount of disposable earnings a creditor is permitted to garnish is determined based on three statutory computations. The most a creditor can garnish in a given week is equal to the smallest of the three results. These computations are: (1) 25 percent of your disposable earnings, (2) total disposable earnings minus 30 times the federal minimum wage, and (3) total disposable earnings minus 30 times the Colorado minimum wage -- which as of April 2015 is $8.23 per hour. For example, if your weekly disposable earnings are $246.90 -- 30 times Colorado’s minimum hourly wage -- creditors cannot garnish any of your paycheck. If your disposable wages increase to $500, however, 25 percent, or $125, may be garnished since it’s smaller than $253.10 -- the excess of your disposable earnings over $246.90, or 30 times the minimum wage.
Exceptions to Colorado Procedure and Garnishment Limitations
If you owe money to a federal or state government agency, such as for a government-backed student loan, or have fallen behind on child support or alimony payments, your wages can be garnished without a court judgment -- meaning these creditors don’t have to sue you to collect. Moreover, a larger percentage of your disposable earnings can be garnished for unpaid child support, alimony and any public assistance you obtained fraudulently and have to pay back.
Ways to Stop Garnishments
Filing bankruptcy generally stops all creditors from garnishing wages while your case is pending. If you ultimately receive a discharge of your debts, creditors are permanently prohibited from garnishing your wages or pursuing other collection methods. When your financial situation doesn’t warrant filing bankruptcy, communicating with creditors and agreeing on a voluntary payment plan may be an option for ending the garnishments as well.
- Colorado Legal Services: Consumer Rights Packet
- Matt Berkus, The Bankruptcy and Debt Authority: Wage Garnishment In Colorado, How Much Can They Take?
- U.S. Department of Labor: Wages and Hours Worked: Wage Garnishment
- U.S. Department of Labor: Fact Sheet #30: The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title 3 (CCPA)
- Department of Labor. "Garnishment." Accessed Feb. 13, 2020.
- Michigan Legal Help. "An Overview of Garnishment." Accessed Feb. 13, 2020.
- Cornell Law School Legal Information Institute. "Consumer Credit Protection Act of 1968 -15 U.S. Code § 1673.Restriction on Garnishment." Accessed Feb. 13, 2020.
- Cornell Law School Legal Information Institute. "Consumer Credit Protection Act of 1968 - 15 U.S. Code § 1672.Definitions." Accessed Feb. 13, 2020.
- Department of Labor. "Fact Sheet 30: The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title III," Page 2. Accessed Feb. 13, 2020.
- United States Department of Labor. "Minimum Wage." Accessed Feb. 13, 2020.
- Department of Labor. "Fact Sheet 30: The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title III," Page 3. Accessed Feb. 13, 2020.
- California Courts. "If You Do Not Pay Your Judgment." Accessed Feb. 13, 2020.
- Office of the U.S. Courts. "Discharge in Bankruptcy – Bankruptcy Basics." Accessed Feb. 13, 2020.
- Cornell Law School Legal Information Institute. "United States Bankruptcy Code - 11 U.S. Code § 523.Exceptions to Discharge." Accessed Feb. 13, 2020.
Michael Marz has worked in the financial sector since 2002, specializing in wealth and estate planning. After spending six years working for a large investment bank and an accounting firm, Marz is now self-employed as a consultant, focusing on complex estate and gift tax compliance and planning.