Can credit card companies garnish wages? Is it legal for them to garnish wages?
Situations arise that cause cardholders not to pay their debts. As embarrassing as the situation may be, credit card companies want to help cardholders to protect their credit. In the event cardholders do not negotiate a repayment option to pay off the credit card debt, credit card companies have the right to take action. Communicating with the credit card companies is the best way to prevent potential financial ruins for cardholders.
Why Credit Card Companies Garnish Wages
Credit card companies garnish wages when cardholders do not repay the debt as agreed. Creditors have the legal right to garnish cardholders’ wages in the event outstanding credit card debts are not paid. Credit card companies do not want to garnish the wages of their customers. Garnishments are the last resort to collect the money that is owed to the credit card company. Creditors have the legal right to garnish wages, property, and bank accounts if all other attempts to collect the money are unsuccessful. The garnishment process has to be initiated by a court order only after a judgment for the monies owed has been entered. Consumers’ options are very limited once the judgment to garnish wages has been entered.
Before the garnishment process, the creditors try to make payment arrangements with the cardholders to obtain past due payments. In some cases, cardholders’ lack of payment pushes the credit card debt past the credit limit. Creditors make attempts for many months to obtain past due payments to get the account current. The creditors try contacting the cardholders by telephone and in writing to try to get the account current.
The next step in the process is to turn over the account to a collection agency. The credit card companies sell the debt to collection agencies who try to collect the debt from the cardholders. They offer payment options to help cardholders pay off the debt so that their wages are not garnished. The companies that buy the debt offer the cardholders the option to pay off the debts over several months or several years, depending on the amount of debt that is owed. After several attempts to resolve the debt, the debt collection company or the credit card company will file a lawsuit against the cardholder.
In many cases, the credit card companies or the collection agencies do not want to make a bargain with the cardholder. In some cases, the companies do, and cardholders should contact them immediately to prevent garnishment. The court must decide if the cardholders’ wages will be garnished. Once this happens, the court decides upon the garnishment amount each month until the debt is paid.
The garnishment amount must be the lesser amount of 25% of wages or 30 times the minimum wage. Social Security payments, unemployment insurance, federal taxes, state taxes, local taxes, and payments to state retirement systems are protected against garnishments. Union dues and health insurance payments are not protected from garnishments. It is also important to know that after two or three garnishment judgments, the law does not protect employees from being fired, according the Consumer Credit Protection Act.
Tips on Preventing Credit Card companies from Garnishing Wages
- Do not ignore contacts from creditors. It may seem easier to avoid the phone calls and the notices in the mail. Contact from creditors is a sign that they want to work out a payment plan with customers to avoid garnishing their wages.
- Contact creditors when paying the monthly payments becomes difficult. Some credit card accounts offer deferred payment options or reduced payment options to cardholders that have difficulty paying their monthly payments. Creditors want their customers to remain in good credit standings. Credit card companies do not volunteer this information. Customers must ask about payment options.
- Consolidate credit card debt if making payments becomes a problem. Consolidating debts is a great way to reduce the monthly payment. Consolidating debt eliminates high interest rates and reduces the payments down to a manageable payment. Consolidating debt reduces the repayment length and prevents wage garnishments.
- Transfer credit card debts to a zero percent credit card. All credit card debts can be placed on one credit card, and cardholders pay no interest during the introductory period. Cardholders can continue to transfer the remaining balance to another credit card until the debt is paid.
Always contact credit card companies when paying monthly bills becomes a struggle. Credit card companies want to work with their customers to continue to do business with them. Contacting the credit card company when financial troubles arise is the best way to prevent wage garnishments.