A credit card company can garnish your wages if it gets a money judgment against you. Learn how to avoid this.
By Cara O'Neill, Attorney · University of the Pacific McGeorge School of Law
Credit card companies can garnish (take) your wages just like most other creditors. But before taking part of your paycheck, the credit card company must first:
- sue you in court
- obtain a money judgment, and
- get a court order directing your employer to deduct funds.
If you're delinquent in your credit card payments, you can take steps to avoid a garnishment.
Delinquent 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 on a timely basis, you break (breach) this contract. The credit card company has various options to try to collect the debt. One of those 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.
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 report. You'll still owe the account but you'll owe it to the debt collector, not the original credit card company.
Debt collectors buy the debt for a fraction of what you owe, then try to get you to make voluntary payments. The debt collector can also sue you in court. If it gets a judgment, it too can attach your wages.
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 garnishment of your paycheck.
- 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'll be responsible for paying tax on any forgiven amount.
- Review state exemptions. In some circ*mstances, 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.
- 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
For information specific to your situation, contact a local debt relief attorney.
