Credit Newsletter

Can Credit Card Companies Garnish Wages?

If you have fallen behind on credit card payments, you may have concerns about wage garnishment. Is it possible for credit card companies to take control of your finances? Learn why credit card companies garnish wages and how to catch up on credit card bills. 

What Is Wage Garnishment?

You should know that credit card companies can absolutely issue a wage garnishment notice if you have credit cards. Wage garnishment is a legal procedure in which a borrower’s income can be withheld due to unpaid debt. These debts can include credit card bills, child support, alimony payments, etc. 

When you apply for a credit card, you are agreeing to make scheduled payments on time. If you fall behind on your monthly bills, you may default on your credit card debts. A credit card default means you have failed to meet the financial obligations of the credit card agreement. In most states, the credit card issuer can then sue you for outstanding credit card debt. 

Only four states in the U.S. do not allow a credit card company to have a borrower’s wages garnished. These four states include North Carolina, South Carolina, Pennsylvania, and Texas. 

The credit card company will file a money judgment against you in an attempt to reclaim the unpaid debt. You will receive a court summons or alternative documentation related to the lawsuit when this occurs. You will need to appear in small claims court on the date listed. 

What if I Ignore a Court Order by a Credit Card Company?

If you face a debt collection lawsuit and receive a summons, also called a court order, you will need to appear in court. You will ultimately lose the court case if you ignore a court order. The credit card company will then be able to get a final judgment for the total debt settlement amount. The judge may also decide if the money should be withdrawn from your employment wages. 

When you fail to appear in court, you will receive a default judgment, and the amount garnished can be up to 25% of your wages! This amount is the cap set by the Debt Collection Improvement Act of 1996. Depending on your state of residence, additional laws may be taken into consideration. Suppose your disposable earnings are not enough to satisfy the outstanding debt payments. In that case, the credit card company may also be able to seize your personal assets. 

You may think that appearing in court is pointless if you are likely to lose the court case. However, there are defenses you may qualify for. For example, the statute of limitations on your unpaid balance may have expired. In that case, a judge may waive your court case. 

What if I Get a Wage Garnishment Order? Can a Credit Card Company Garnish My Wages? 

Suppose a credit card company summons you to appear in small claims court. In that case, a judge will make a verdict based on evidence provided by the credit card company. If you lose a court judgment, the judge can order a percentage of your earnings withheld by an employer. This percentage will be withdrawn every paycheck until the outstanding credit card debt is gone. 

Wage garnishment is not limited to disposable earnings. Money can be taken out of your commissions, bonuses, and retirement programs. 

You may worry about your employment status when a court informs your employer of your court case. Title III of the Consumer Credit Protection Act (CCPA) protects employees from termination of employment when their wages have been garnished. However, if you are subject to a second court-ordered wage garnishment, your employer can legally terminate your employment. Title III also limits the amount of money that can be garnished every week for an unpaid credit card debt. 

Can I Object to a Wage Garnishment?

Yes! Contact an attorney if you think a debt collection lawsuit is dismissible or open to objection. You may be able to challenge a credit card issuer that attempts to garnish your wages. Your attorney will need to prepare and paperwork ahead of the court date. 

When you receive your garnishment documents, there will be written instructions on how to object. If your documents do not contain this information, you may contact the clerk of the court. Some courts provide an additional form so you can write an objection. When an objection form is not available, you will simply have to write out your objection on a blank paper and file it on time. 

Keep in mind that a court can waive your objection to wage garnishment for the following reasons: 

  • You fail to provide adequate reasons for an objection.
  • You file with the wrong court.
  • You file after the allotted period.

Does Wage Garnishment Affect My Credit Score or Credit Report?

If credit card issuers have garnished your wages, you may already know that your credit score has been affected. However, you can rest easy knowing wage garnishment will not appear on your credit report.

Having late unsecured debt payments can dramatically decrease your FICO score. Payment history accounts for a large percentage of your credit score calculation. If you’re interested in learning how to improve a bad credit score after a credit card company files a lawsuit, keep reading. 

How Is a Credit Score Determined? 

Long gone are the days when credit approval was entirely based on personal bias. Credit scores allow financial institutions to make a lending decision based on your financial history. A credit score depends on the calculation of five financial categories. Take a look:

Payment History

Your payment history is the most crucial category for credit score calculation. This category accounts for 35% of your FICO score. If you constantly miss payments, your score can be severely damaged. Having bad credit scores can affect borrowing opportunities

You may wonder if it is bad to pay off a credit card early. The truth is, the earlier you pay, the better! Missing payments can result in late fees. You could use that extra money for personal expenses instead. Sign up for an automatic payment plan to avoid missing payments and calls from a debt collector. 

Total Debt 

The amount of debt you have makes up 30% of your total credit calculation. The less debt you have, the better your finances look to lenders. If you use more than 30% of your available credit line, your score will decrease, and creditors may consider you a financial risk. Minimizing the amount of money you borrow can also help you avoid debt collector calls. 

Length of Credit History 

The longer you manage financial accounts, the better your credit score will be. The length of your credit history accounts for 15% of your credit score. Successfully managing your finances for long periods can make you look financially responsible to creditors. Opening new accounts may disrupt this category but may not significantly alter your score. 

New Credit Inquiries

Applying for too many loans within one year can decrease your credit score. New credit inquiries affect 10% of your credit calculation. If you want a new rewards card or line of credit, consider how it will affect your financial life. 

Credit Mix 

The type of loans you have will affect your score by 10%. Ideally, you should have both revolving credit and installment loans. Being able to manage different types of financial accounts can successfully demonstrate your financial responsibility to lenders. 

Tips To Keep in Mind 

If you are drowning in debt and need a way out, consider applying for a loan when insufficient funds are in your bank account. If you continue to ignore calls from a debt collector, the credit card company may start the wage garnishment process. 

Fast payday loans are one option to consider but may not offer the financial relief you need. Payday loans are short-term loans that are available to individuals with bad credit. However, this loan typically only provides up to a few hundred dollars. This may not be enough to cover the total debt amount you owe to credit card companies. 

A personal installment loan could quickly help you get thousands of dollars in your bank account. The qualification requirements are flexible, so you may qualify despite low credit. Apply for financial relief today to avoid wage garnishment and get your finances in order.

References:

Garnishment
Can Credit Card Companies Garnish My Wages?
What Do I Do If I Am Served With a Summons for a Court Appearance?
If Your Wages Are Garnished: Your Rights