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Can Credit Card Companies Garnish Your Wages
If you are behind on your credit debt, you’re probably wondering can credit card companies garnish your wages?
Continue reading to learn more information and resources to help with credit debt.
If you are unable to pay your credit card bills, the worst course of action is to discontinue payments entirely.
If you fail to meet your debt responsibilities, your credit card company will likely transfer your account to a collections department, and if you do not reply to your debt collectors, you risk being sued and having your earnings seized to pay off your debt.
This means that a portion of each paycheck would be deducted automatically.
There are numerous methods for avoiding pay garnishment. If you can make the minimal monthly payments on your credit cards, for example, you will not make much progress toward paying off your debt but will keep your account in good standing.
If you are unable to make those minimal payments, contact your credit card company and request consideration for a hardship program.
Here’s everything you need to know about wage garnishment, including how to avoid it, how to protect yourself, and if your federal stimulus check can be garnished to repay prior debts.
What is Garnishment of Wages?
Garnishment of wages is a last resort in the debt collection process. If you are unable to pay your bills, your creditor will initiate collection action by sending you reminders regarding missed payments.
Additionally, you may incur late fees or have your interest rate increase and if you continue to fall behind on payments, your credit score is sure to suffer.
If you do not pay your debt, your creditor will refer you to a collection agency.
Due to the fact that debt collectors only have a limited amount of time to collect on an old debt, they will begin by phoning you (often repeatedly) and may choose to sue you for non-payment.
If the action is successful and the court finds in favor of the debt collector, your wages may be garnished to ensure that the debts are paid.
With wage garnishment, a portion of each paycheck is transferred straight to the debt collector until the debt is fully paid.
Your employer’s payroll department will be required to deduct the funds from your paycheck, indicating that your employer is aware you have not paid off your debts.
The Consumer Credit Protection Act prohibits your employer from firing you if your earnings are garnished for a single debt, but that protection vanishes if your wages are taken for several arrears.
Can My Salary Be Withheld if I Owe Money on My Credit Cards?
Yes, your income can be garnished for an outstanding credit card bill—even more so if the debt is eventually turned over to collectors.
While many people connect salary garnishment with overdue child support, defaulted student loans, or back taxes, courts can also seize wages for an unpaid credit card bill.
Wages can also be garnished for debts incurred on a joint credit card, such as one used with a partner or spouse.
What Are the Limitations on Wage Garnishment?
The amount of money that can be deducted from each paycheck is limited by federal law.
Creditors may not garnish more than 25% of your income (before taxes and qualified deductions are deducted) or the amount by which your income exceeds 30 times the federal minimum wage (currently $7.25/hr), whichever is less.
In some instances, your wages may be insufficient to be garnished legally.
“If the pay period is weekly and the disposable income is less than $217.50 ($7.25 30), garnishment is not permitted.
If disposable income exceeds $217.50 but does not exceed $290 ($7.25 40), the excess over $217.50 may be garnished.
If disposable income exceeds $290, a maximum of 25% may be withheld.
When pay periods exceed one week, multiples of the weekly restrictions must be applied to determine the maximum amounts that may be garnished,” as stated on the website of the United States Department of Labor.
Certain states have stricter wage garnishment restrictions than the federal government, allowing debtors to seize even less of each paycheck. You can consult your state’s wage garnishment statutes.
Creditors and debt collectors may not garnish your earnings if you file for bankruptcy – however you may need to notify your creditors, your employer, and the legal system.
How To Avoid Wage Garnishment
If you have already been sent to collectors for a credit card debt, there are steps you may take to protect yourself from income garnishment.
To begin, contact the debt collection agency to inquire about debt forgiveness alternatives.
If you are able to make a lump sum payment on the remaining balance, for example, the collection agency may reduce your total debt.
If your debt has reached the point where collection agencies are sending you notices of impending litigation, do not disregard these notices or letters.
Contact the debt collection agency as soon as you receive your first notice to see if a deal can be reached without going to court.
If you are sued for an old debt, do not disregard the summons. If you do not appear in court, the debt collector automatically wins.
Therefore, seem professionally dressed and prepared to defend oneself.
Bear in mind that each state has a statute of limitations on debt collection, and your debt collector may be suing you for a debt they no longer have the authority to collect.
You may even choose to speak with a lawyer about your rights and alternatives; while lawyers are not free, they are often less expensive than wage garnishment.
What To Do if You Can’t Pay Your Credit Card Bills
If you’re having difficulty paying your credit card payments, your first action should be to call your credit card issuer and ask for a reduced monthly payment or interest rate.
Additionally, you may wish to inquire about credit card forbearance options, which allow you to defer payments for a few months without affecting your credit score.
Consider calling a trustworthy nonprofit credit counseling program if you require extra assistance.
These organizations work with you to develop a financial plan that enables you to make your debt payments on time, and they can also provide guidance on debt relief choices such as debt consolidation.