Investor's wiki

Wage Assignment

Wage Assignment

What Is a Wage Assignment?

Wage assignment is the act of taking money straightforwardly from an employee's paycheck to pay back a debt obligation. Wage assignments might be either voluntary or involuntary, contingent upon the situation.

Such an automatic withholding plan might be utilized to pay back an assortment of debt obligations, including back taxes, defaulted student loan debt, and both child and spousal support payments.

A wage assignment is regularly a last resort of a lender to receive repayment from a formerly failed borrower to pay a debt obligation. A wage assignment, when involuntary, may likewise be alluded to as wage garnishment and requires a court order.

How Wage Assignment Works

Wage assignments are commonly incurred for debts that have gone unpaid for a drawn out period of time. Wage assignments can be isolated into two categories: voluntary and involuntary. Employees may some of the time opt for a willfully wage assignment to pay for things like union duty or to add to a retirement fund.

Employees might even intentionally opt into a wage assignment plan as a part of a payday loan repayment guarantee.

At the point when a wage assignment is either undertaken willfully or commanded by a court and served to an employer, it is handled as part of an employer's payroll strategy. The employee needs to sit idle, as their paycheck is diminished by the amount of the assignment, and noted on their pay stub.

Wage assignments are a significant device for collecting unpaid debts, yet tragically, they might be related with abusive lending practices.

Wage Assignment: Voluntary

In a voluntary wage assignment, a worker requests their employer to keep a portion from their paycheck and send it to a creditor to pay off a debt. Loan agreements may at times remember for their terms a voluntary wage assignment clause should the borrower default on their loan.

Payday lenders frequently incorporate voluntary wage assignments into their loan agreements to better their possibilities being reimbursed. Such a lender might start a wage assignment without a court order. Laws with respect to wage assignments differ by state.

For instance, in West Virginia, wage assignments are capped at 25% of a worker's take-home earnings, the employee's signature must be authenticated, and agreements must be restored yearly. Under Illinois law, a lender can't resort to wage assignment until a debt is 40 days in default. The wage assignment can't go on for over three years, and the worker can stop the wage assignment whenever.

Wage Assignment: Involuntary

Involuntary wage assignments require a court order and are probably going to be employed to collect spousal and child support payments that have been ordered by a court. Involuntary wage assignments may likewise be utilized to collect unpaid court fines or student loans that have been defaulted on.

Special Considerations

A few states permit people to pursue voluntary child support agreements. In such a case, the two parents must consent to a plan. When that occurs, a voluntary wage assignment might start. In the event that a child support or welfare agency is involved, they would need to endorse any plan.


  • A wage assignment take funds straightforwardly from an employee's paycheck to pay back a debt.
  • Wage assignments might be either voluntary or involuntary.
  • A wage assignment, when involuntary, may likewise be alluded to as wage garnishment and requires a court order.