Individuals all over the country are taking out credit loans to purchase vehicles, jewelry, and other properties that require the assistance of a credit loan. Credit lines allow consumers to own a variety of properties and may act as a safety net whenever troubling times present themselves. Credit lines are an essential part of our economy, however, credit can easily turn into a nightmare when we fail to pay back. 

When individuals overestimate their ability to pay back debt, they may acquire more credit card debt than they are able to repay in the near future. In most cases, debtors that have acquired more than they can chew will find it difficult to pay back all of their debt. Debtors may be missing payments to satisfy other financial obligations or may find it difficult to administer their money when they do not make enough money to maintain a healthy standard of living.

When debtors fail to provide payments for an extended period of time, they may receive phone calls, emails, and letters from their creditors to request a payment. When debtors fail to respond to their creditors, creditors may take legal action to receive some form of payment. Creditors may either pursue a foreclosure, repossession, or wage garnishment. 

The issue with wage garnishment is that a creditor will usually have no idea about your economic situation until you either 1) contact your credit provider and negotiate or 2) file a bankruptcy. Wage garnishment is a legal action that can be pursued by creditors when debtors fail to meet payment obligations. Debtors who fail to meet payment obligations may find a lawsuit being served to them faster than they may think. Creditors that have grown impatient with your failure to pay will usually take immediate action to place a lien on your property or garnish your wage. When debtors are living paycheck to paycheck, a wage garnishment is one of the last things that a debtor wants to know about.

Debtors that receive notice of a lawsuit from their creditors should understand that they are taking legal action to claim some form of payment. When you receive notice of a lawsuit you may want to back by an attorney who can help you fight your lawsuit. An attorney will be capable of representing your case in a courtroom and may help you prevent the lawsuit through negotiation. In addition, whenever a lawsuit is inevitable, you may require the attention of an attorney who can assist you through courtroom procedures.

In a lawsuit, you will need to defend your case against creditors who are professionally represented by experts in wage garnishment and/or foreclosure laws. Creditors who are after your property will usually stop at nothing to claim your property and place a garnishment on your wage. Creditors who are win cases may require that you pay more than you would if you had established a debt payment program beforehand or filed for bankruptcy.

If you are facing a lawsuit, you will want to speak with an attorney as soon as possible to ensure that you do not miss any deadlines and to ensure that your case is represented by an expert in wage garnishment and foreclosure. Individuals that are not able to enter a debt payment program may be required to file a bankruptcy to prevent a debt collection lawsuit. To speak with an attorney about your specific case, you may contact the Bankruptcy Attorney at 424-285-5525.

An attorney by your side can help guide your case through bankruptcy and may help you with other resources that can help you get back on your feet. When we face troubling times, everything can seem to go wrong, but you do not have to tackle the situation on your own. Contact a local attorney to discuss your case and to learn about the steps you can take to fight a lawsuit

What is wage garnishment?

 A wage garnishment takes place between your creditors and your employer. Debtors that are far behind on their payments or who have failed to pay a loan such as a car loan may find that their wage is garnished for failure to provide monthly payments. Creditors that seek payment may file a lawsuit so that they are paid a certain amount every month without having to wait for you to pay. When your creditors proceed with a successful wage garnishment, they will contact your employer to establish a payment program. The payment program will dictate the amount that will be taken away from your paycheck until the credit line is paid off. The problem with wage garnishments is that the creditor assumes that the debtor has the capacity to pay but is refusing to pay which is why they may file a lawsuit to claim every penny that you owe.

Wage garnishment allows creditors to establish a repayment program often times disregarding the debtor's financial affairs. For instance, a debt collector may dictate the amount that will be deducted from your paycheck.  This is especially true for debtors that avoid court dates meaning that they give up their opportunity to have their side of the story heard. Wage garnishments can be prevented by contacting the lending party and explaining the debtor's circumstances. Creditors want to avoid pushing you to the brink of bankruptcy and are more likely to reduce your payment obligations and might discharge a portion of your debt. If you receive a notice of a lawsuit, you are encouraged to speak with your creditors or you may contact an attorney who is capable of mediating the situation helping you establish a debt settlement program that works for both parties.

Types of Wage Garnishments

Some of the more common reasons wages are garnished is for failure to pay a student loan, alimony, child support, tax liens, and other consumer debts. According to a study produced by the Automatic Data Processing (ADP), a human resource management software and service company, men are more likely than females to face wage garnishment. Furthermore, the study found that between 2011 and 2013 more than two-thirds of those facing wage garnishments were due to child support.

When debtors find themselves in a lawsuit for failure to provide payment they may face one of the two forms of garnishment 1) wage garnishment or 2) nonwage garnishment. The first, as mentioned above, takes place between your employer and creditor. The creditor establishes the amount that you are required to pay every month and the employer will cut a check from your check for the requested amount. On the other hand, a nonwage garnishment takes place between your creditor and your bank. Through a nonwage garnishment, creditors may be able to dip their hand into your bank account.

More often than not a creditor will have to obtain a court order to proceed with a wage garnishment, however, if you owe on taxes and child support, creditors may be able to proceed without a court order. Wage garnishment will end when you pay off your debts and court fees.

How does wage garnishment affect me?

A wage garnishment may affect you in many ways or it may not affect you at all. If you are a living paycheck to paycheck and you are living at a minimal level, meaning you are only taking care of your basic requirements like your rent, water, and power bills, then a wage garnishment will have a huge impact. Individuals living at the minimal level and are hit with a wage garnishment, may not be capable of keeping up with the minimal financial obligations. This can mean that the debtor is no longer capable of paying for rent which either means the person is left to live in a car or with family or friends. In addition, it goes without saying that a wage garnishment can result in falling behind on other debts which can lead to lawsuits coming from every direction.

On the other hand, if you are a high earning individual with enough disposable income to save and live comfortably, you may be required to limit the amount you spend on goods. High earning individuals that neglect their debt may be placed under wage garnishment until the debt is paid in complete. A wage garnishment may not have the same impact on high earning individuals as it does with individuals who are already living paycheck to paycheck. In any case, you will want to avoid a wage garnishment as it may affect your credit score.

Wage garnishment can have an effect on your credit report

When your wage is garnished it will usually not reflect on your credit report which means it will not affect your credit score. However, wage garnishment is a lawsuit and like all other lawsuits, it will appear on your public records. Bankers and lenders can assess public records which can lead to the garnishment being reported. If the wage garnishment is reported, it may have a significant impact on your credit score.

In general, if the wage garnishment is reported, it will appear on the credit report for up to 7 years. When crediting agencies find out about your wage garnishment they may be more reluctant to let you borrow money. A wage garnishment is not a fun procedure for the lending and receiving party, so if a wage garnishment appears on your credit or public records, it may prevent you from qualifying for a credit.

How much are creditors allowed to take from my earnings?

Depending on your state, the amount you owe, and your disposable income a creditor may obtain up to 60 percent of your paycheck. Wage garnishments differ case by case so the following statistics may not apply to you. However, if your situation is similar, you will have a better understanding of how garnishment works. For the purpose of the following section, a disposable income is how much you have left after you pay your living essentials like your rent, food, and bills. Creditors can establish the following claims on disposable income.

  • Child Support and Alimony: between fifty to sixty percent of your disposable income
  • Taxes: up to fifteen percent taken by the Internal Revenue Service (IRS). The IRS will take into account any dependents that you claim in your household.
  • Credit Card, medical bills, personal loans: up to twenty-five percent of a minimum wage earning individuals disposable income. If a minimum wage earning individual has less than $217 in disposable income, their wage may not be garnished.
  • Student loans: up to fifteen percent

When debtors fall behind on their payments they may face lawsuits from their creditors. When a creditor is no longer capable of waiting for payment they have the right to pursue payment and take legal action.  If you receive notice of a lawsuit from your creditor, it is usually a clear sign that you are being pursued to provide a payment. Some lawsuits result in wage garnishments when the debtor is unable or unwilling to cooperate with the creditor. A garnished wage is no fun and if you receive notice of a lawsuit, it is in your best interest to contact an attorney who can help fight the lawsuit. Fighting a creditors lawsuit can be achieved through informal negotiations with the lending party allowing the debtor to establish a debt settlement program before entering a courtroom.

Fortunately for debtors, there are a variety of ways to deal with a wage garnishment. Debtors that are unable to make payments to their credit loans may establish a debt settlement with their debtors or they may prevent the action by filing a bankruptcy. A bankruptcy prevents any debt collecting activity and lawsuits including wage garnishments.

A wage-garnishment is a legal action that we all want to avoid. Not only does it have the ability to affect our credit score, it may impact your other financial obligations. If you find yourself living paycheck to paycheck, you may want to consult with an attorney about debt relief. Often, it is better to take precautionary measures in order to avoid a lawsuit. To speak with the Bankruptcy Attorney about your case, you may contact us at 424-285-5525.