Can Credit Card Companies Garnish My Wages?

Credit card companies can garnish (take) your wages just like most other creditors. But before taking part of your pay, the credit card company must first sue you in court to get a money judgment and a court order directing your employer to deduct funds from your pay.

If you're delinquent in your credit card payments, you can take steps to avoid a garnishment.

What Happens If I Don't Pay My Credit Card Debt?

When you get a credit card, you agree to make monthly payments. This agreement constitutes a legal contract. When you don't make these payments, you break (breach) this contract. Credit card companies have various options for trying to collect debt. One of those options is to sue you and garnish your wages.

When a Credit Card Company Can Garnish Your Wages

A wage garnishment shouldn't come out of the blue. Credit card companies can't garnish your wages without taking some steps. So, you should have adequate notice.

Here's a synopsis of the process:

• the credit card company files a complaint and serves it to you
• if you want to fight the case, you'll file an answer (but you must move quickly)
• you'll exchange evidence using the discovery process
• the credit card company must prove that you owe the debt at trial
• if successful, the judge will issue a money judgment in the amount owed, and
• the creditor can use the money judgment to get a wage garnishment order.

Of course, if you owe the debt, it will be difficult to defend the case. Instead, if you don't answer the complaint, the court will issue a money judgment by default. You'll lose automatically, and the creditor will be able to collect sooner.

After getting a money judgment from the court, the credit card company has to file a request for garnishment with the sheriff, court clerk, or some other local official. (Exactly who the company has to file the request with varies depending on state practice). The "garnishee" (the employer) then gets a notice directing it to give part of your pay to the garnishor (the credit card company).

You'll get notice of the garnishment and the opportunity to protect your money from garnishment with exemptions (see below).

Why a Debt Collector Can Garnish Your Wages

Major credit card companies sell your delinquent credit card debt to debt collectors. You'll know this has happened if you see a charge-off notation on your credit reports. You'll still owe the account but you'll owe it to the debt collector, not the original credit card company.

Debt collectors buy debt for a fraction of what you owe and try to get you to make voluntary payments. They can also sue you in court. If they get a judgment, they can attach (garnish) your wages.

What Is the Most They Can Garnish From Your Pay?

Federal and state laws protect most of your pay from garnishment. Under federal law, judgment creditors can garnish 25% of your disposable earnings for that week (what's left after mandatory deductions) or the amount by which your disposable earnings for that week exceed 30 times the federal minimum hourly wage, whichever is less. (15 U.S.C. § 1673).

If your wages are very low, your entire paycheck might be protected.

Example of How Much Can Be Garnished

So, the first $217.50 ($7.25 per hour times 30 = $217.50) of your weekly pay after taxes and Social Security are deducted is exempt from garnishment. This amount is $435 if you get paid every two weeks. This amount could go up if the federal minimum wage of $7.25 per hour goes up.

If your pay is between $217.50 and $290 a week, the creditor can garnish only the amount over $217.50. However, if your take-home pay exceeds $290 a week, the creditor can garnish 25% of your wages.

State Laws Might Provide More Protections

Your state's garnishment laws might protect more of your wages. Some states don't allow wage garnishments. Generally, however, once the money is deposited in your bank account, it's not protected.

Also, some federal and state benefits are protected from garnishment. For example, Social Security, Supplemental Security Income (SSI), and Department of Veterans Affairs (VA) benefits. There are some exceptions for child support obligations and debts you owe the federal government.

How to Protect Your Wages From Credit Card Issuers

If you're in danger of having your wages garnished by a credit card company or debt collector, here are some steps you can take to avoid it.

• Settle the debt. A credit card company might be willing to accept a settlement instead of going through the courts to garnish your wages. Settling the debt could allow you to avoid a lawsuit and wage garnishment. However, keep in mind that settlements aren't as easy to come by as you might think. Many companies require proof of your financial situation before agreeing to reduce your balance. And you might have to pay tax on any forgiven amount. You might also be able to reach a settlement even after the creditor gets a money judgment and garnishment order.
• Review state exemptions. In some circumstances, states allow you to protect some wages with exemptions. When you receive the wage garnishment notice, find out if your state's laws allow you to protect a portion of your earnings. You can file a document in state court claiming the exemption, and the judge will decide whether it is valid or not. Be sure to file your exemption paperwork by the given deadline.
• File for bankruptcy. You can immediately stop a credit card garnishment with bankruptcy. It will likely wipe out other debt, too. Even so, a bankruptcy can remain on your credit report as a negative mark for up to ten years, so it's important to consider how filing for bankruptcy will affect other areas of your financial life.

Talk to a Lawyer

Contact a local debt relief attorney for information specific to your situation and to find out if you can stop a wage garnishment.