What It Is, How It Works, Example [Video]

An earnings withholding order is a court order issued by a judge that instructs an employer to garnish wages from one of their employees. These notices are issued when creditors have succeeded in obtaining a legal judgment against a debtor, who, in this case, is the employee.

The order effectively instructs a third party to deduct payments directly from a debtor’s paycheck or bank account in order to satisfy a ruling.

Default risk is an inescapable component of lending. After all, there can never be any guarantee that a borrower will repay their debts in a complete or timely manner. In the case of consumer lending, borrowers can avoid paying their debts by taking actions like changing their address or bank information, relocating to a different state, or simply refusing to respond to a creditor’s communications.

This risk is especially pronounced when the debt in question is not collateralized, leaving the creditor with …