How Can a Creditor Garnish My Wages or Bank Accounts?
Author: Janine Lee, Senior Paralegal
One reason people sometimes file for bankruptcy protection is the threat (or action) of wage garnishment. What is wage garnishment and when can a creditor garnish your wages? Unlike a house or car, however, credit card debt is unsecured. Therefore, while a creditor on a house or car can seek to foreclose or repossess your assets, unsecured creditors, such as credit card companies, have other means of enforcing their rights to collect debts. Wage garnishment is one of them. A creditor cannot garnish your wages or bank accounts for simply missing a payment or two on a credit card. The creditor may, however, seek to obtain a judgment against you, which will allow them to ultimately garnish your wages or bank accounts.
The Judgment Process
A creditor can increase your interest rate, report you to a credit bureau and contact you by mail and telephone in order to attempt to collect delinquent debts. In fact, you may have already experienced annoying and repetitive phone calls and letters as a result of late payments. It is cheaper for a creditor to seek payment through these means before resorting to the garnishment process. If these attempts by a creditor are not successful, the creditor may resort to the garnishment process. Credit card companies typically do not resort to this measure until you are approximately six months delinquent in payments, however, they may do so at any time.
If a creditor wants to garnish your wages or bank accounts, it must obtain a judgment from a court to do so. In order to obtain a judgment, a creditor must first sue you in court. When a creditor sues you. they are required to send you
service of the “complaint” and “summons.” If you do not respond to the complaint in the required timeframe (typically 21 days), the creditor may ask the court for a “default judgment.” If you choose to respond and appear in court, and if the court rules in favor of the creditor, it may still obtain a judgment against you.
If a creditor obtains a judgment against you, you will receive a notice of the judgment from the court. If you fail to pay the judgment amount, the creditor can seek approval from the court to garnish your wages or bank account. There are exceptions to this rule, however. For instance, the government does not need a court order to seize funds for debts such as state or federal taxes.
What is a Garnishment
A garnishment is a process whereby a creditor may remove a portion of funds from a bank account or paycheck on a regular basis in order to collect a debt. However, state and federal law regulate the amount of money that may be garnished from a consumer’s wages or bank account. Under most statutes, a creditor may not garnish more than 25% of a consumer’s earnings in a particular workweek.
What Can I Do?
A bankruptcy filing will stop the garnishment process. The automatic stay imposed upon filing of a bankruptcy case prevents creditors from taking any further action to collect on delinquent debts. You may file bankruptcy at any point in the process. Therefore, many people do not wait until their wages or bank accounts are garnished. If you are considering filing bankruptcy to stop creditor collection efforts, our attorneys can advise you regarding your options and the relief available to you under the Bankruptcy Code. Call us today at 702-385-5544 to schedule your free consultation.