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.