When an employer receives an order from a judicial or governmental agency requiring the employer to withhold a certain sum from the wages of an employee for payment of a debt, it is called wage garnishment. There are both federal and state laws that apply to wage garnishments.

These laws set maximum amounts that can be garnished from an employee’s paycheck, and the priority of certain types of garnishments over others when an employer is faced with deductions from an employee’s paycheck for more than one garnishment. In addition, the Bankruptcy Code prohibits garnishment and tax levies once the employee has filed for bankruptcy. An employer may not discharge an employee because of wage garnishment "for any one indebtedness" in order to prevent discrimination.

Employers must also take specific steps upon receipt of a collection request from an outside agency, including answering the order and calculating applicable exemptions.