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Can Credit Card Companies Garnish Your Wages?

George Simons | January 10, 2024

George Simons
Co-Founder of SoloSuit
George Simons, JD/MBA

George Simons is the co-founder and CEO of SoloSuit. He has helped Americans protect over $1 billion from predatory debt lawsuits. George graduated from BYU Law school in 2020 with a JD-MBA. In his spare time, George likes to cook, because he likes to eat.

Edited by Hannah Locklear

Hannah Locklear
Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Summary: Is your old credit card company coming after you for a past due balance? Worried that they'll garnish your wages? Find out if credit card companies can garnish your wages and how to stop them!

If a credit card company files a lawsuit related to an unpaid credit card bill and secures a default judgment against you, then the company can attain the legal authority to garnish your wages. This is why you should be proactive and respond to a debt collection lawsuit filed by a credit card company and you should not feel bullied into making a payment simply because a debt collector levies threats about wage garnishment. Numerous steps are required before a credit card company or any other creditor can garnish your income.

Laws and Procedures of Wage Garnishment

Any credit card company is, by law, allowed to legally seize your wages before the paycheck lands in your pocket. However, for this to happen, the credit card company must first:

  • Sue you in a court of law
  • Win the case against you by obtaining a money judgment, then
  • Have the judge decide to give a court order instructing your employer to deduct funds from your income as the payment method

It's a crime for any debt collector to threaten you with a lawsuit if they can't legally do it or if they don't intend to do so. However, they could still hurt you by employing other means of getting their money back.

These could include:

  • Hiring a debt collection agency
  • Damaging your credit report, thus making it hard for you to get credit in the future

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Who Can Garnish Your Wages?

As mentioned earlier, a creditor can force your employer to directly deduct funds from your income when you owe them an unsettled debt. These debts include:

  • Unpaid student loan
  • Child support funds
  • Alimony funds after divorce
  • Back taxes, or
  • Unpaid bills such as personal loans or credit card balance

Generally, any creditor can legally seize your income. But, there are those creditors who must meet specific requirements, failure to which no wage garnishment is permitted. Most of them must file a lawsuit against you, win it and obtain a court order before legally seizing a dime from your income.

This means that if you owe money to a credit card company, furniture company, doctor, or dentist, you won't have to worry about wage garnishments unless those companies sue you. However, not all creditors need a court order before garnishing your wages. Those that can seize your funds without a court order include:

1. Agencies or People to Whom You Owe Alimony Funds or Child Support

Application of legal withholding of your wages happens if you fail to pay for child support or if you fall behind on your alimony or child support obligations. The government can resort to this option without any court ruling or your approval.

Federal law allows a wage garnishment of up to 50% of your disposable earnings for child support. A judge has the discretionary authority to increase this to 60% if you don't have any other spouse or child support. Another 5% is added if you are late by 12 weeks or more on your obligations.

2. Taxation Agencies to Which You Owe Back Taxes

The state taxing authority or the Internal Revenue Service (IRS) can seize a percentage of your income without necessarily obtaining a court order. The amount the IRS can garnish from you depends on your deduction amounts and the number of dependents you have. For unpaid taxes, state and local governments can recover the amount from your paycheck, depending on the state law.

3. Legal Collectors of Federally Guaranteed Student Loans

The state government can apply an administrative garnishment on individuals who fall behind on the student loan repayment without acquiring a court order. These funds typically amount to 15% of the individual's disposable income.

Remember, the percentage of wages that a creditor can garnish entirely relies upon the type of debt and the federal and state garnishment limits as presented in the constitution. Usually, federal law limits the deductible amount to 25% of your disposable earnings. However, the state can change this limitation.

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How to Challenge Wage Garnishment

Receiving a reduced income due to wage garnishment comes with several challenges. These include hardships in running your daily routines. Several options are at your disposal as far as handling the wage garnishment is concerned. Such options include:

  • Debt elimination through bankruptcy
  • Garnishment reduction through filing a claim of exemption in the court of law

When you are declared bankrupt, you receive protection from creditors. This declaration means that debt collectors can no longer pursue you for what you owe them. Neither can your creditors sue you in court, nor your wages garnished.

However, this does not mean that the state will cancel all your debts. They still exist until you successfully finish your bankruptcy. Once this happens, each one of your creditors will receive their share of assets and pledge to forgive the remainder should any exist.

The debts eliminated by bankruptcy include:

  • Bank loans
  • Retail store cards and accounts
  • Installment loans
  • Personal loans
  • Past due bills
  • Certain student loans
  • Loans from individuals

A claim of exemption is a form that a debtor files with the levying officer to protect a particular property or a certain amount of funds from the creditor. In this form, the debtor explains why the creditor should not take this property or funds based on the laws and rules about the exempted property types.

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Procedures Followed by a Creditor Before Garnishing Your Wages

It is a federal offense for credit card companies to garnish your wages without notifying you. Here's a summary of the steps they are required to take before seizing a percentage of your wages:

  • The credit card company sues you in a court of law and serves you with a lawsuit
  • If you want to defend yourself, then you must move quickly and file an answer in a court of law
  • The discovery process will be at your disposal for exchanging the evidence
  • The credit card company must prove that you indeed owe them a debt by providing the evidence during the trial
  • The trial's success will prompt the judge to issue a court order (money judgment) on the amount owed, and
  • The creditor can use the court order to get a garnishment order for your debts

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How it works: SoloSuit is a step-by-step web-app that asks you all the necessary questions to complete your answer. Upon completion, you can either print the completed forms and mail in the hard copies to the courts or you can pay SoloSuit to file it for you and to have an attorney review the document.

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