Beware: Ignoring Credit Card Debt Could Lead to Wage Garnishment

Are you struggling with credit card debt? Do you fear that the credit card company will soon take action against you?

You are not alone. The average American household owes $15,000 in credit card debt. Many of them face collection actions, including wage garnishment, for their unpaid credit card debt.

Unfortunately, you cannot realistically ignore your credit card debt. By not addressing the problem, credit card companies are forced to take action against you to recover what you owe.

How Credit Card Companies Garnish Your Wages

When you applied for your credit card, you agree to make monthly payments. The credit card agreement is a legally binding contract. Neglecting to make timely credit card payments will result in a breach of your credit card agreement.

Breaking this contract gives the credit card company a legal right to file a lawsuit against you to try and collect the debt. Garnishing your wages is one possible outcome of a lawsuit.

Usually your credit card company will notify you if you are delinquent on the payments or if if the account is about to go into collections. Often, credit card companies sell delinquent credit card debt to debt buyers who will then collect the money from you.

If you do not work out satisfactory payment arrangement with the credit card company, or debt collector, you might be subjected to a lawsuit in your local state court.  

When a lawsuit is filed against you, you will receive notice from the court explaining the collection action and when you should appear in court. If you choose to fight the action, you must appear in court to plead your case. The credit card company representatives will have evidence showing that you owe the debt. It will be up to you to provide evidence that proves you do not owe the debt or that the debt amount is incorrect.

If the court is convinced that you owe the debt then the court will issue a judgment in favor of the creditor. A judgment allows the creditor garnish your wages. If you choose not to answer the complaint and go to court, the court will issue a judgment by default.

Under the wage garnishment, you will end up repaying the principle of the credit card debt, plus accrued interest, court fees, and sometimes attorney fees for the collection action. The court could allow the credit card company to garnish your wages for up to 25% of your income. This could cause a devastating hardship to your finances and affect your ability to afford daily living expenses.

How to Stop Credit Card Wage Garnishment 

If you are in danger of having your wages garnished by a credit card company or debt collector, you need to act fast. When you receive notice that the credit card company is getting ready to take action against you, you should reach out and attempt to settle the debt. They may be willing to accept a settlement such as lowering your balance or interest rate.

But, getting a settlement may not be easy. Many credit card companies require you to prove what they consider financial hardship before agreeing to make any changes. Also, if they do agree to the settlement you could be responsible for paying taxes on a part of the balance forgiven.

You could also file for bankruptcy to stop credit card wage garnishment. As soon as you file bankruptcy, an automatic stay goes into effect as to all your creditors. This means your creditors must stop all collection actions against you, including wage garnishment, for the duration of your bankruptcy case.

The automatic stay gives you time to organize your finances and get your debts discharged through Chapter 7 or Chapter 13 bankruptcy.

Under each bankruptcy, credit card debt can get discharged if you complete the bankruptcy process. A discharge of debts means you will no longer have to repay the credit card debt and any wage garnishment will get canceled.

Getting Help Stopping a Credit Card Wage Garnishment

Stopping a credit card wage garnishment can be difficult. Knowing which option of stopping a garnishment is best for you and your financial situation requires a lot of knowledge of debt reorganization.

Brock & Stout’s lawyers have over 20 years of experience helping clients make the decisions that will help them get a financial fresh start. Contact us for a free evaluation of your financial situation to see if we can help you. Let our family help your family on the road to financial recovery.