October 2013

By: James B. Sherman, Esq. & Phoebe A. Taurick, Esq.

The Eighth Circuit Court of Appeals held that disability payments are “earnings” within the meaning of the Consumer Credit Protection Act, which limits the garnishment of earnings, in United States of America v. Ashcraft. Ashcraft was ordered to pay restitution as part of her sentence for several criminal charges. At the time she was receiving long-term disability benefits through disability insurance provided by her former employer.

The government sought to garnish Ashcraft’s disability payments in order to collect. Ashcraft objected, claiming that her disability payments were “earnings,” and thus subject to the same garnishment limitations as more traditional earnings such as wages, i.e., the weekly garnishment cannot exceed the lesser of: (1) 25% of the employee’s disposable earnings; or (2) the amount by which an employee’s disposable earnings are greater than 30 times the federal minimum wage. The court agreed with Ashcraft, holding that because the disability insurance was part of her compensation at the time, the current disability payments are “compensation paid or payable for personal services,” and therefore, “earnings.”