House Bill 19-1189: Wage Garnishment Reform = Bad News for Associations

So far, the 2019 legislative session has been fairly uneventful with regards to proposed legislation affecting common interest communities. However, last week the House introduced HB 19-1189 that, if passed, will significantly impact an association’s ability to collect delinquent debt.

Currently, Colorado law permits creditors, including common interest communities, to garnish wages of debtors up to the following limits:  the lesser of a) 25% of disposable earnings after mandatory deductions or b) any wages that exceed thirty times (30x) the federal minimum hourly wage. The proposed legislation aims to lower the limits to the lesser of a) 15% of disposable earnings or b) wages that exceed 50x the federal minimum hourly wage. 

Let’s run the numbers assuming a worker makes the current federal minimum wage of $7.25 an hour. Under current law, only weekly wages that exceed $217.50 are subject to garnishment but that amount would increase to $362.50 under the proposed legislation.  Next, let’s assume that a debtor makes $20 per hour or $800.00 gross weekly and net wages after deductions are $650.00 —-currently, a creditor could garnish up to $162.50 weekly but the proposed legislation would reduce that amount to $97.50.

In summary, the proposed legislation, if passed, is bad news for community associations since wage garnishments may no longer be available to garnish lower income workers or it will take a significantly longer period of time to collect debt against higher income workers.