Garnishment and Other Debt Claims

WHAT

Collection of Employee Debts

Claims against employees’ pay may involve legal proceedings through which creditors seek to recover debts owed to them by TVA employees.

Collection of Debts Owed to TVA

Debts owed to TVA are normally not part of this process. However, as a creditor, TVA may file a direct suit or become a party to a bankruptcy proceeding.

WHO

All employees

WHY

TVA is required by law to assist in the collection of just financial obligations. These may include garnishments, bankruptcies, IRS levies, child support orders, alimony orders, and any other official process which indicates that a debt claim is valid and just. If employees do not make satisfactory arrangements for paying their debts, they may expect claimants to use these debt claim processes to recover debts which are owed. TVA is usually entitled to deduct an additional amount as a fee for its expenses incurred in responding to the debt collection process.

DEFINITIONS

Disposable Earnings - The amount of an employee’s earnings which remains after deductions required by law, which may include debts to TVA, federal income taxes, FICA taxes, state and local taxes, and basic FEGLI.

Release - An order from the court having jurisdiction or the IRS which releases TVA from the requirements of a debt collection proceeding.

HOW

TYPES OF DEBT CLAIMS

Garnishments

A garnishment is issued when a creditor petitions the court to require TVA to send portions of an employee’s pay to court to satisfy a debt. Garnishment laws are established by the various states in addition to federal statutes and may vary in details. Generally, TVA is required to withhold up to 25 percent of an employee’s disposable earnings and periodically send that amount to the court. An employee’s pay can be subjected to garnishment until the entire amount of the debt has been collected. Additional information regarding garnishment deductions can be obtained from the Employee Accounting Department.

Bankruptcy

There are two types of personal bankruptcies. Under both types, the effect of the bankruptcy is to prohibit creditors from proceeding with the debt collection process except through bankruptcy court.

Chapter 7 Bankruptcy is a process under which an individual’s assets, if any, are liquidated, creditors paid from the proceeds and debts discharged.

Chapter 13 Bankruptcy is a process in which creditors and the employee agree to a plan for satisfactory payment of the employee’s debts over time. Ordinarily, deductions for the payments are made from the employee’s pay.

IRS Levy

An IRS levy is an order from the U.S. Internal Revenue Service directing TVA to withhold a specified amount of an employee’s pay to satisfy a federal tax debt. If the IRS determines that you owe back taxes, the IRS may issue a levy requiring deductions from your pay until the back taxes are paid, or the IRS may allow you to work out a payment schedule--in which case you would be asked to sign a consent agreement authorizing deductions from your pay. IRS levies allow an amount to be exempt from withholding based on the employee’s tax filing status and the number of exemptions claimed.

Child Support

This is a specialized type of court process established specifically to provide financial support for a minor child. Child support process takes precedence over any other garnishments and over IRS levies. Child support process may require withholding up to 60 percent of disposable earnings on current payments and up to 65 percent of disposable earnings on overdue payments.

Alimony and Other Court Orders

ROLES

All Employees

Should pay financial obligations on time.
Should have writs released as soon as possible.

Human Resource Representatives and Payroll Officers

Act as recipients of debt collection process served on TVA.
Forward orders to Employee Accounting.
Respond to employees’ questions regarding debt claims.

Employee Accounting

Processes all debt claims for deductions from employees’ pay.
Responds to questions about the status of debt claims and about the debt claim process in general.
Prepares payments to the various courts and to the IRS.
Maintains historical records of debt claims processed.
Develops and maintains procedures on the processing of debt claims.

Office of the General Counsel

Answers all debt collection process as required by law.
Advises Employee Accounting on processing debt claims.
Assists in the development of procedures on debt claims processing.

Accounts Payable

Disburses payments as directed by Employee Accounting.

RESOURCES

Employee Accounting
Office of the General Counsel
Human Resource Representatives

Last Revised 06/2001