When You Can't Pay Your Debts FAQ

Questions:

• I feel completely overwhelmed by my debts and don't know where to begin. What should I do?
• I might have to miss a car payment. Should I let the lender repossess?
• How soon after I miss a house payment will the bank begin foreclosure proceedings?
• If foreclosure is looming, might I be better off just selling my house?
• My utility bill was huge because of a very cold winter. Do I have to pay it all at once?
• When can a creditor garnish my wages?

Answer:

When can a creditor garnish my wages?

Usually wage garnishment works like this: The creditor sues you, obtains a court judgment, and then solicits the help of a sheriff or other law enforcement officer to garnish your wages. The maximum the creditor can take is 25% of your net pay. If you can't live on only 75% of your wages, you can challenge that amount in court.

There are a couple of exceptions:

• If you owe back child support, expect to lost a much larger percentage of your wages -- 50% or more, depending on whether you are supporting others.
• If you own back taxes, the IRS can take a large chunk of your pay without suing you or obtaining a court order.

To help you evaluate your debt situation, see Solve Your Money Troubles: Debt, Credit & Bankruptcy, by Robin Leonard and Margaret Reiter (Nolo).