Can Creditors Garnish Your Wages?
When can creditors garnish your wages? If you do not stay current on the payments that are due on your bills you may find that the creditor can pursue action to have your earnings withheld and paid to them. There are guidelines in each state that govern how they can take your earnings and state which process to follow. The creditor must adhere to the policies of the Fair Debt Collection Practices Act (the Act). The only person who can take you to court in order to collect the debt from you is the creditor to whom you owe the money. A lot of time the creditor will hire the services of a collection agency to try to get payment of the debt. The agency must follow the rules of the Act, as well, and unless your creditor has sold the debt to them, they may not file suit against you.
Creditors can garnish your wages if they file a lawsuit in court that sues you for the money due. The creditor must prevail in the hearing, or in other words they have to win the suit in order to continue the collection efforts. If the creditor obtains a judgment, or wins the hearing, the company can ask for a wage withholdings judgment that they can forward to your employer. The federal law says that five times the minimum wage is exempt from forced withholdings. This is 75% of your earnings. This law takes precedence over the state laws that are written if they allow for a greater exemption than the state law.
Most creditors can garnish your wages, but they prefer to negotiate a settlement due to the expense of the court filing. If you don’t owe very much, the creditor will be extremely hesitant to file the action that will take up time and money. The creditor will try to call you and try to get you to respond to letters that they send to collect the debt. Sometimes they will hire another agency that specializes in debt collection or they will sell the note to the collection agency. After resorting to court filing, the company will still seek to settle the matter out of court if you are willing to negotiate and make the agreed upon payments.
If you have financial difficulties that have prevented you from making the payment on your debt you can file for protection under the bankruptcy code. You can ask the judge to discharge the debt whether the company has a judgment against you or has yet to file court papers. When you ask a judge to discharge, or wipe out your debt, you will find that there are severe consequences to your credit. The judge will issue a stay, or an order that stops all the collection processes until he has ruled on the bankruptcy filing. Even if you have had a successful creditor obtain wage withholdings, the employer will be directed to cease the withholding until the bankruptcy case is settled. Federal government agencies can skip the court process and send documentation to your employer to withhold and mail payments to them for your debt.
If you have received notice that collection proceedings have started to seek payment of debt, you may want to go ahead and negotiate with the lender to see if you can come to an agreement before formal proceedings continue. Since the question, ‘Can creditors garnish may wages?’ is answered in the affirmative you will need to seek the counsel of a lawyer or financial advisor who specializes in these type actions if you receive notice that you may lose wages to pay your debt.