Disposable Earnings

Disposable Earnings

That portion of one's income that a person is free to spend or invest as he or she sees fit, after payment of taxes and other obligations.

Legally mandated deductions are those for the payment of taxes and Social Security. Any deductions for medical insurance, Pension plans, life insurance, or employee savings plans do not qualify and must be included in the disposable earnings. Take-home pay is, therefore, not necessarily synonymous with disposable earnings because of this distinction between the deductions.

The federal Consumer Credit Protection Act (15 U.S.C.A. § 1601 et seq. [1968]) establishes a minimum amount of disposable earnings that can be garnished by a debtor's creditors. The lesser figure of 25 percent of a worker's weekly disposable earnings or the amount by which his or her disposable earnings exceed thirty times the maximum hourly wage is subject to Garnishment.

State laws also impose restrictions on the garnishment of debtor's wages.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.
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