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An assignment of wages is the transfer of the right to collect wages from the wage earner to a creditor. The assignment of wages is usually effectuated by deducting from an employee's earnings the amount necessary to pay off a debt. The deduction may be made to pay spousal or child support, back taxes, or defaulted student loans.
Assignment of wages is regulated by the federal Consumer Credit Protection Act and various other state laws. The laws regulating wage assignment differ by jurisdiction, depending on the type of assignment and the income level of the employee.
There are two types of wage assignment:
1. Voluntary assignment where an employee requests the employer to deduct a portion of his pay and send it to a creditor. Frequently, loan agreements include a voluntary assignment of wage clause in case the person defaults on the loan.
2. Involuntary wage assignments are more commonly known as wage garnishments. This type of assignment requires a court order and is generally used to collect child and spousal support, defaulted student loans, and unpaid court fines.