Retiree Pay Garnishment

Updated: March 31, 2020
In this Article

    Retiree Pay Garnishment If an American consumer doesn’t pay their debts, there are several avenues of recourse including negative credit reporting, small claims court, and a practice known as garnishment.

    Garnishment can be applied to wages, retirement pay, or other “countable income” and military members are not exempted from such garnishment where it is warranted.

    It’s true that military members have certain protections in place against garnishment, but in some cases even those protections aren’t enough to prevent a creditor or a spouse from seeking legal relief from a lack of payment.

    Wage garnishment is not automatic, and military pay garnishment requires specific steps and paperwork that must be filed with the appropriate government agency. There are several considerations both creditor and debtor must be aware of in such cases.

    Garnishing a currently serving military member’s pay requires a specific set of steps; so does the garnishment of military retirement pay. The two processes are not identical and it’s a mistake to assume you can get the same legal relief via garnishment for retirement pay as you can active duty pay.

    How does military retiree pay garnishment work? As you will see from the information below, much depends on state law, and the applicable dates of a military member’s federal service, marriage and divorce where applicable, and other factors.

    What Wage Garnishment Is And Is Not

    Before discussing retiree pay garnishment, it’s important to understand what happens and what does not happen with wage garnishment.

    In most cases, involuntary wage garnishment cannot happen without a court order. For military members, there must also be a request filed with the federal government for the garnishment which is subject to approval or denial by the government.

    When retirement pay is garnished, there are specific rules about how and under what circumstances that may occur. Military retiree pay cannot be garnished without the assistance of the court, and even then if proper steps are not taken it may be impossible to collect.

    Military Retiree Pay Garnishment Is Not Handled By The Federal Government On Behalf Of The Creditor

    Wage garnishment is not permitted in some cases, and garnishment for military people requires payments to go directly to the court or the creditor with no third parties involved.

    The military or the federal government does not handle or accept payments of any kind. It will not place the funds into escrow or have any other involvement in the payment portion of the arrangement.

    Any such requests for government assistance in collecting or accepting garnishment funds will be automatically denied by the federal government. 

    There Is A Difference Between Military Pay Garnishment And Military Retirement Pay Garnishment

    Those currently serving are not permitted to have a wage garnishment placed for commercial debts. This does NOT mean that creditors have no recourse; in such cases an involuntary allotment, not a pay garnishment, is used to collect the debt.

    But military retirees cannot have their retirement pay garnished for commercial debt; the DFAS official site explains that military retirement pay is exempt. However, military retirement pay CAN be garnished for unpaid child support, alimony, property division, etc.

    This is permitted under the Uniformed Services Former Spouses’ Protection Act, which explains the limits, rights, and responsibilities under the Act for both creditors and military members.

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    What You Need To Know About Military Retiree Pay Garnishment

    Former spouses of retired military members are not automatically awarded or entitled to the member’s retired pay or a portion of that pay.

    In order to qualify for military retirement pay garnishment, the ex-spouse must have a court judgment or decision in the ex-spouse’s favor that specifically awards “a portion of a member’s military retired pay as property in their final court order” according to the Defense Finance and Accounting Agency official site.

    How Federal Law Affects Garnishment of Military Retirement Pay

    The Uniformed Services Former Spouses Protection Act, also known as USFSPA), addresses retirement pay garnishment issues. USFSPA establishes/acknowledges the legal right for state courts “to distribute military retired pay to a spouse or former spouse.”

    USFSPA also provides a mechanism for making sure those court orders are fulfilled via the federal government (in this case through the Department of Defense.)

    What Court Orders May Be Enforced Under USFSPA

    State court orders that can be enforced under the Act include:

    • Divorce decrees
    • Dissolution of marriage
    • Annulment
    • Legal separation
    • Court-ordered property settlements

    Under the Act, in order to be enforceable with the government, the court order “must provide for the payment” of child support, alimony, or retired pay as property, etc. This order must be on behalf of a former spouse, which is a very important point.

    There may be no provisions for retirement pay garnishment for a non-spouse, but it is very important to insure that the nature of the relationship in such cases is not addressed by other parts of state law.

    For example, how long does a couple have to reside together in the same domicile before they are considered to be in a common-law relationship?

    Not all states recognize common law marriages, but if you live in a state that does, it’s best to be familiar with such laws and how they can potentially affect a claim, lawsuit, or related issues. Don’t assume your state does or does not have a common law marriage rule, domestic partnership laws, or something similar to them.

    Not knowing could cost a great deal down the road and that is true for both plaintiff and respondent.

    What The Federal Government Says About Garnishment Of Military Retirement Pay

    The Defense Finance and Accounting System official site reminds creditors, lawyers, and those who hire them, “Retired military members’ pay is exempt from garnishment for commercial debts.” That is the major difference between active duty garnishment and retirement pay garnishment.

    Under the Uniformed Services Former Spouses’ Protection Act (USFSPA), child support, spousal support, or a property division are allowable if a court chooses to garnish retirement pay for those requirements.

    The 10/10 Rule

    Military retirement pay garnishment is affected by something known as the 10/10 rule. That rule states that in order to qualify for certain types of military pay garnishment (dividing retired pay as property to be enforced under the USFSPA–see below for more information on that procedure), the service member/military retiree and the former spouse “must have been married to each other for 10 years or more during which the member performed at least 10 years of military service creditable towards retirement eligibility,” according to DFAS at the time of this writing.

    This rule does not affect all possible circumstances under which pay garnishment may be justified, but it is an important consideration.

    If you are not sure how the 10/10 rule may affect your claim, it’s best to seek legal counsel with experience in both general divorce law in your state, military cases in particular.

    Requirements Of The Creditor To File For Garnishment

    The creditor must serve the Defense Finance And Accounting Agency (DFAS) with a request for garnishment that meets the government requirements.

    Those requirements include an authorization for the paying agency to withhold funds and pay them to the court or the creditor. These procedures must conform to state law. The creditor must send all documents to DFAS at:

    Garnishment Law Directorate-HGA
    P.O. Box 998002
    Cleveland OH 44199-8002

    Fax: 877-622-5930

    What You Should Know About State Jurisdiction

    DFAS states that in order to have authority to enforce state court orders for military retiree pay garnishment, federal guidelines direct the state court to “have had jurisdiction over the member” due to one or more of the following:

    • The retiree’s residence is within the jurisdiction of the state court (other than because of military assignment)
    • The retiree’s home is located within the jurisdiction of the court, or
    • The retiree gives consent to the jurisdiction of the court
    • There is consent to the court’s jurisdiction via “taking some affirmative action in the legal proceeding”

    Other Important Considerations

    For divorces that happened while the service member was still on active duty and not retired, the DFAS site reminds that “the member’s rights under the Servicemember’s Civil Relief Act (SCRA), or, for divorces prior to Dec. 19, 2003” SCRA provisions must be observed by the state court.

    In situations where retired pay for military members is being divided as community property or as a “marital asset,” the court award must include a specific dollar amount, or divide the retirement pay in percentages.

    In situations where the divorce occurs while the military member is still on active duty, the ex-spouse may be offered a “hypothetical retired pay award.” DFAS states that percentage awards for the retired pay “is automatically construed.”

    DFAS also states that something known as a “Qualified Domestic Relations Order” is not required to divide retired pay as long as the former spouse’s award is clearly defined in the court order.

    In 2017, federal legislation known as the National Defense Authorization Act (NDAA) of 2017 affected how certain aspects of this garnishment process is handled.

    The NDAA states that for all applicable divorces filed after Dec. 23, 2016 where the court order becomes final prior to the military member’s retirement, the definition of retirement pay as “disposable income” is limited to “the amount of basic pay payable to the member for the member’s pay grade and years of service at the time of the court order.”

    About The AuthorJoe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News

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