Can a Credit Card Company Garnish My Wages?
Some debt collectors including some credit card companies will try to bully you into making a payment by threatening to garnish your wages. If this is happening to you, it's important for you to understand the laws around wage garnishment, how having your wages garnished can impact your credit report, and what you can do to help protect your income from creditors.
The Legality of Wage Garnishment
Can they actually follow through on that threat? Yes, but not until they sue you, win, and have a judge decide to garnish your wages as the method of payment. It's illegal for debt collectors to threaten you with a lawsuit if they don't intend to do so or if they can't legally do it. Your credit card is unlikely to actually sue you for wage garnishment but they can certainly hurt you in other ways, including damaging your credit report and involving a debt collection agency.
Don't Ignore a Lawsuit
If you are served with legal documents about a lawsuit, it's in your best interests to contact an attorney. Don't ignore the lawsuit as doing so will only hurt you. If you don't show up to court, the plaintiff (whoever filed the lawsuit) can have a default judgment entered in their favor. This means you automatically owe whatever amount the creditor sued you for and the court decides how to get the money from you, possibly through wage garnishment.
If you receive a notice from your employer about your wages being garnished but were never served with lawsuit papers, you should immediately contact a lawyer. Chances are good that the creditor/debt collector didn't follow the correct process and you may be able to get the judgment overturned.
You can avoid a lawsuit and garnished wages altogether by paying off debts before they become seriously delinquent. Creditors can sue you, whether you owe them $500 or $50,000.
Wage Garnishment and Your Credit Report
When a creditor sues you and wins, a judgment is entered on your credit report and remains on there for seven years from the date of filing. As time passes, this judgment will impact your numerical credit score less and less but will be visible to future creditors for years. This could impact your ability to open other credit cards, get a mortgage, or buy or lease a car.
Protecting Your Wages From Creditors
While creditors, including credit card companies, do not often file wage garnishment lawsuits, if you have a steady job and seriously delinquent debts, wage garnishment is a very real possibility. It may be that your state is one of the states which prohibit wage garnishment. Or your maximum wage garnishment amount might be either so low or your income might be so high that having your wages garnished won't impact your lifestyle. It is also possible that a court could rule that the creditor may levy your bank account rather than garnish your wages, which will absolutely impact your lifestyle.
Rather than risk wage garnishment or a bank levy, you should reach out to your credit card companies and try to work with them to settle your debt. If your account is seriously delinquent, it may be too late to fix your credit report but you may be able to salvage the situation with regards to how much you owe. Often credit cards will settle for a fraction of the debt, usually in a bulk payment, although you may be able to negotiate a payment plan.