Know Your Rights

Can a Credit Card Company Take My Paycheck?

When applying for a credit card, you sign a contract agreeing to make monthly payments on your purchases, either in entirety or at an agreed upon minimum amount.  By signing the contract, you agree to make payments in full or be charged interest for paying less than the balance or for failing to make payment at all.  Furthermore, by failing to make any payment, you agree that the credit card company can charge you late fees or finance charges on top of the interest.  Seem a little one sided?  This agreement is a legal and enforceable contract and if you breach the contract, by failing to make payment, the credit card company has the right to sue you and garnish your wages for the dollar amount owed, which often well outweighs your initial balance, by thousands of dollars.

Unlike most debt, when you stop paying on your credit card the amount builds quickly as interest rates soar.  By signing a credit card agreement, you are likely responsible for excessive late fees and penalties that get added to the original balance that you owed and that amount will continue to grow each month that you continue to default on your payment.  It is important to understand that while a credit card company can garnish your wages, it cannot do so without suing you in a court of law and obtaining a judgment against you.

In order to garnish your wages, the credit card company or collection agency must first file a lawsuit and serve you with notice of the suit.  Legally, to obtain a judgment against a debtor, the creditor or collection agency must serve you with notice of the lawsuit and provide you with an opportunity to defend yourself in court.  If you don't defend yourself, or you don't defend yourself properly, the credit card company can then obtain a judgment against you and lastly, provide your employer with a copy of the garnishment order.  There are options for debtors who fear garnishment and wish to protect their wages from the credit card companies.

The first option you can take to protect your paycheck is to try to settle the debt.  Even if the garnishment was initiated by a collection agency, contact the original creditor, the credit card company, and try to work out a payment plan.  Settlement negotiations will save you the expense of legal fees and may allow you to pay a monthly amount that is more affordable.  Garnishment is a set percentage of your salary and will likely be more than you can afford or you probably would have paid the bill initially.    

A second option to avoid garnishment in the event the credit card company has already obtained a judgment is to review your state law.  Some states have exemptions or laws in place that will protect a portion of your wages.  When your employer provides you with the notice of garnishment, check your state's laws to make sure the correct dollar amount is being withheld from your paycheck.  If you feel the amount is in error based on your findings, you can file a notice with the court claiming the exemption and request the amount be altered.      

The last option to avoid garnishment is to file for Bankruptcy, which will immediately stop the order.  Filing for Bankruptcy is a serious financial decision and you should consult a licensed attorney in your state before making taking this course of action.  While filing for bankruptcy will stop the garnishment, this should not be your only reason for filing.

If you have an order of garnishment and would like to discuss your options with an attorney, contact SmithMarco P.C. for a free case review.

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