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The first thing that happens with a credit card judgment is that additional fees increase the outstanding balance, sometimes significantly. While state laws determine what fees a judgment can include, court costs, attorney’s fees and pre- and post-judgment interest fees are common. The pre-judgment interest rate is the annual interest rate on the account. A creditor can charge interest from the date of default until the judgment award date. Post-judgment interest, which most states set in the range of 8 to 12 percent, is interest the creditor can continue to add until you pay the judgment in full.
A wage garnishment is the most common option for enforcing a credit card judgment. Federal laws allow a creditor to garnish up to 25 percent of your after-tax earnings, although collection laws in some state offer greater protections. An employer can't fire you for a single wage garnishment, but multiple assignments can put your job at risk. Federal laws do not protect you from retaliation when more than one creditor garnishes your wages or when the same creditor garnishes your wages for
two or more debts.
Additional Collection Options
Although credit card companies use these less often, a bank levy, personal property seizure and a real estate lien are available options. Depending on state laws, a creditor may get information about your bank accounts and assets by questioning you in court or by sending you a questionnaire. Both options require that you comply and be truthful or face perjury charges. In addition, if you live in a community property state, a creditor can freeze all the money in a joint bank account, seize joint property items and place a court-ordered lien for the full amount you owe on your property.
Federal and state laws protect your tax return and certain types of property. For example, most states protect personal property items like clothing, some furniture items and household appliances, as well as some of the equity in your home. State laws also determine how long a creditor has to collect on a credit card judgment. However, most states allow collection activities to continue for 10 to 20 years, with an option to apply for an extension if necessary.