Could stronger wage garnishment protections mean fewer debt collection lawsuits?
Debt collection lawsuits are surging. After years of pandemic-era decline, case filings are climbing back toward pre-pandemic levels across the country. Our recent analysis found that courts in eight states saw dramatic increases in debt collection filings in 2024, with some jurisdictions reporting their highest volume in years. The New York Times covered these findings and discussed strategies for consumers facing debt lawsuits.
The surge affects more than just the people being sued. Courts spend significant time and resources on high-volume, routine collection cases, leaving less capacity for complex civil matters and criminal cases. Small businesses without dedicated payroll infrastructure face administrative burdens processing wage garnishment orders, calculating protected amounts, and navigating legal requirements where mistakes can mean liability.
Wage garnishment protections are one potential lever policymakers might consider to address these issues. When someone loses a debt collection lawsuit, the creditor gets the power to take money directly from their paycheck through wage garnishment. Federal law sets basic limits on how much can be taken, but states vary in how much paycheck protection they provide.
Could stronger wage protections help stem the rising tide of debt collection lawsuits? That’s what we wanted to find out.
Wage garnishment protections vary from state to state
Back in 1968, Congress passed the Consumer Credit Protection Act which established baseline wage garnishment rules across the country. Under this law, creditors can take no more than 25% of someone’s disposable earnings, or the amount by which weekly pay exceeds 30 times the federal minimum wage (which today means $217.50)—whichever results in less money being taken.
But states can do more, and many have. The National Consumer Law Center (NCLC) grades each state on how well it shields workers’ wages, using a straightforward A-F system. States with an A rating—Texas, North Carolina, Pennsylvania, and South Carolina—ban wage garnishment for most consumer debts. States with a C rating like California, Florida, and Massachusetts protect enough wages to keep a worker’s paycheck above the poverty level for a family of four. States with an F rating like Georgia, Michigan, and Kentucky stick to the federal minimum.
Consider a retail worker earning $22 per hour for a 40-hour week. In Georgia, a state with an F rating, that worker could lose $165 every week to garnishment. That represents a quarter of their income. Their weekly take home pay drops to $493, pushing them down to 80% of the federal poverty guideline for a family of four. In California, a state with a C rating, that same worker’s entire paycheck is protected. They don’t earn enough to be garnished at all and would remain above the poverty line.
Why wage protections might change filing behavior
When debt collectors decide whether to file a lawsuit, they’re making a business calculation. Filing costs money in the form of court fees, attorney costs, and administrative resources. Winning the lawsuit is just the first step. From there, the debt collector needs to actually collect the debt to make the lawsuit worthwhile. Enforcing a judgment by garnishing wages is one of the main tools for doing just that.
Stronger wage protections change this calculation. In states where large portions of a worker’s paycheck can’t be touched, we suspect debt collectors are more selective about the cases they pursue. They might focus more on larger debts or people with higher incomes where garnishment would still yield meaningful amounts. For smaller debts or lower-wage workers, the economics of litigation become less favorable.
This is backed by research. A working paper from the Consumer Financial Protection Bureau found that states with stricter wage garnishment protections tend to have fewer civil judgments per capita. They also found that as wage protections get stronger, debt collectors receive fewer judgments overall, but the average debt amount in each case increases. In other words, lawsuits seem to target higher-value debts with better chances of repayment.
Our analysis builds on this foundation but examines a broader question: Do states with stronger wage garnishment protections see fewer debt collection lawsuits filed in the first place? We focus on case filings rather than judgments because being sued creates significant burdens for people being sued—time off work, court fees, emotional stress, potential legal costs—regardless of whether the case ultimately results in a judgment. It also impacts the court systems that have to process these cases.
States with stronger protections see fewer lawsuits
We built a dataset combining court filing data from dozens of states with information on their wage garnishment protections, poverty rates, and demographics. You can check out our methodology and findings in our full report.
The pattern was clear: states with stronger wage garnishment protections see fewer debt collection lawsuits filed per capita, even after controlling for how many people in each state have debt in collections.
We ran several regression models to isolate the effect of garnishment protections from other factors. The relationship held. Moving up one letter grade on the NCLC’s scale—say, from F to D, or from B to A—is associated with about 0.23 fewer lawsuits filed per 100 adults with debt in collections.
Wage garnishment protections were, by far, the most impactful lever for lowering the number of lawsuits filed. When we tested other broader consumer protection, through NCLC’s overall protections rating, we found there was no association between these protections and the number of lawsuits filed. Moreover, when we included both wage protections and overall protections in the same model, wage protections remained significant while overall protections did not. This suggests that wage garnishment protections specifically, rather than consumer protection policies generally, are what matter for lawsuit filing rates.
Policy simulations predict fewer cases filed
To help policymakers understand what these findings might mean for their states, we ran simulations. If the nine states currently rated F improved their protections to a C level, our model estimates they could see about 128,000 fewer debt collection cases filed annually. This would mean increasing protections from the federal minimum to protecting $600 (in 2024) to keep at least a family of four above the poverty level.
Take Utah, which had an F rating during our study period and saw more than 58,000 consumer debt cases filed in 2023. If Utah moved to a C rating, our simulation suggests they might see roughly 12,000 fewer cases—a 20% reduction. Georgia, Kansas, and Kentucky show similar patterns.
These are estimates, not predictions. They assume the statistical relationships we observed would hold after policy changes, and actual outcomes could differ based on factors our model doesn’t capture. But they provide a framework for thinking about the scale of impact that wage garnishment reforms might have.
The tradeoffs are real
Stronger protections leave more money in workers’ pockets to cover rent, food, and healthcare. For families living paycheck to paycheck, that matters. But stronger protections also extend debt repayment timelines for creditors. We built a dashboard to help policymakers and stakeholders model these tradeoffs for their own states. Users can select a state and see what would happen if protections were increased or if another state’s rules were adopted. The tool shows projected impacts on three key outcomes: the number of cases filed annually, the amount of wages protected each week for workers at different income levels, and how long it would take to repay a typical debt. Results can be downloaded as a PDF to share with colleagues or use in policy discussions. The dashboard also allows comparison across states on key metrics to see where different states rank.
The tool shows that while protections may shield the lowest-income workers’ entire paychecks, higher earners still remain subject to garnishment above protected thresholds. Creditors retain other collection mechanisms too, such as bank account garnishments, asset seizure, and negotiated payment plans. The main adjustment involves accepting longer repayment timelines and factoring these extended collection periods into their business models.
What this means for policymakers
This analysis shows a clear pattern: states with stronger wage garnishment protections see fewer debt collection lawsuits filed, even after accounting for poverty rates, demographics, and other consumer protection policies. This relationship is consistent across different statistical approaches and appears specifically tied to wage protections rather than consumer protections more broadly.
The findings point to wage garnishment protections as a policy lever that could help address multiple problems at once. Stronger wage garnishment protections could:
- Leave more money in the pockets of low-wage workers to cover basic needs.
- Reduce the flood of routine collection cases overwhelming state courts.
- Ease administrative burdens on small business employers.
And our simulations suggest the scale of impact could be substantial—potentially tens of thousands fewer cases annually in states that strengthen their protections.
Of course, these benefits come with tradeoffs. Creditors would face longer repayment timelines, which CFPB’s analysis suggests could affect lending decisions and borrowing costs. The ideal balance will vary by state based on local economic conditions, court capacity, and policy priorities. But states grappling with surging debt collection caseloads now have evidence that wage garnishment protections represent a concrete policy option worth serious consideration.
More research would help refine these estimates and better understand the mechanisms at work. Do debt collectors file fewer cases because garnishment is less effective, or do they shift to other collection methods? How do creditors adjust their business models in response to stronger protections? What is the fiscal impact on courts, and do courts handle remaining cases more effectively when they have fewer routine collection matters consuming their dockets? Answering these questions would help states design more effective policies. But the current evidence suggests that for states looking to reduce the burden of debt litigation on vulnerable families, overwhelmed courts, and small employers, stronger wage protections might be part of the solution.