Debt, especially credit card debt, is a serious problem these days. The average household that carries a balance from month to month on their cards has about $16,000 in credit card debt. Dealing with that kind of debt is challenging, and it can open up entirely new sets of issues to handle. One issue that can arise due to high levels of debt is an inability to pay high monthly minimum payments. A question many borrowers ask is whether their paychecks can be garnished to pay off their debts. The short answer is yes, but with some qualifications. Here’s what you need to know right now about having your paycheck garnished for debt.
What Is Garnishment?
Garnishment is a legal process that creditors can use to pursue borrowers who are unable or unwilling to pay back their debts. There are two primary types of garnishment: wage garnishment, in which creditors seek and obtain court orders for your employer to commit a certain portion of your paycheck to repay a debt the creditor is owed; and non-wage garnishment, which a creditor can use to obtain a borrower’s property, such as a bank account or rental income in order to recover a debt owed. While consumers may be unfamiliar with garnishment, it’s by no means rare; a 2014 study by the ADP Research Institute found that about 7% of workers had wages garnished in the recent past.
How Wage Garnishment Works
Credit card companies can pursue wage garnishment against you if you stop making payments on your credit card or fall far behind on those payments. Since it’s a time-consuming process, most credit card companies will use the courts as a method of last resort; instead, credit card companies will typically attempt to contact you for repayment via letters or phone calls or sell your debt at a discount to debt collectors. However, if the credit card company remains unsatisfied with your ability to repay your debt on your own, it may then pursue wage garnishment.
Typically, the credit card company will file a legal claim against you, arguing that you owe the company a certain amount of money; as a borrower, you’ll have an opportunity to present your own evidence, and a judge will have to decide whether you actually owe the money the credit card company claims you do. If the judge decides that you do owe some amount of money to a creditor, that creditor can then request a legal order be put in place for your employer to forward a set amount of your paycheck directly to the creditor to repay your debt.
Limits on Wage Garnishment
There are limits on how much of your paycheck can be garnished. The garnishment will be based upon your disposable income, which is your gross income minus any applicable state and federal taxes as well as any other legally required payments such as for social security or a state-sanctioned retirement account. The maximum amount that can be garnished to a creditor is 25% or the amount your weekly income exceeds 30 times the federal minimum wage (currently $7.25 an hour), whichever is less. Therefore, if you work 40 hours a week at the Federal minimum wage and earn $290 per week, the maximum amount that could be garnished from your paycheck is $72.50.
There may be additional exceptions and requirements based upon your particular situation, so ensure you discuss your situation with your attorney if a court orders your employer to garnish your wages. You can learn more about Federal laws pertaining to wage garnishments and your rights as an employee from the Department of Labor’s Employee Standards Administration.
What to Do if a Credit Card Company Wants to Garnish Your Wages
If the credit card company decides to pursue legal action against you to obtain a wage garnishment order, ensure you prepare for that. If you have an attorney, contact the office to request services; if you don’t have a lawyer, consider hiring one right away. Ensure you have all your paperwork in order, especially if you intend to dispute the amount of debt the credit card company s claiming against you, or if you have other issues that you believe the court should consider prior to garnishing your wages. Ensure that you involve your attorney throughout this entire process. Your attorney may be aware of state and federal laws that can limit your liability to your creditors or reduce the amount of your wages that can be garnished.
Wage garnishment can have a significant impact on your financial situation, so ensure you know your rights. If you fear that a creditor may attempt to garnish your wages, contact an attorney right away to help you navigate a complex legal process. Additionally, work hard to take the actions that can help you avoid having your wages garnished in the first place. If you find yourself unable to repay high levels of debt, don’t go it alone; get help from professionals, like the team at National Debt Relief.