My Wages are Being Garnished!

Collection calls and letters are a major hassle, and cause serious stress – I can tell you from experience that dealing with collections can keep you from sleeping at night. It’s on par with being drawn and quartered as far as pain quotients go.

The thing is, if you can’t (or won’t) negotiate with collection agents, things can get far worse. And in this economy, they often do.

See, if a collector thinks you’re holding out on them (whether you really are or not), they can file a lawsuit against you in your county’s municipal or magistrate court. After they obtain a judgment, they can do the seemingly unthinkable – they can take part of your wages to apply toward your debt.

This process, called wage garnishment, can cause you serious financial distress. Federal law allows creditors to take up to 25 percent of your disposable earnings, which is the amount you earn minus statutory deductions such as federal taxes and Social Security payments. 401(k) contributions don’t count. Health insurance premiums don’t count. Even the voluntary contributions you agreed to to help displaced mimes in Siberia don’t count.

All but four states – South Carolina, Texas, North Carolina and Pennsylvania – allow wage garnishment. And once the court has filed a garnishment order, there’s not much you can do. Your employer has to pay the required percentage of your wages to the creditor until your debt is satisfied.

Joy.

Wage garnishment sucks. It’s like syphilis – it damned near never goes away. Each state imposes different rules on creditors that limit the length of time they can pursue wage garnishment after obtaining a civil judgment – in some states, creditors can seek garnishment for 20 years or longer.

You can send the creditor’s attorney proof that you’ve already paid your debt, or that you’ve made your payments on time. Still, it’s your word against theirs. They’ve paid their nominal fees for the privilege of sucking your income away, and they have the legal right to do just that.

Wage garnishment is one of the few things I can think of that could possibly warrant bankruptcy. (If you’ve been reading for a while, you know that I usually recommend doing anything possible to avoid bankruptcy.) Of course, I can’t (and won’t) recommend you file bankruptcy.

If you’ve received a wage garnishment letter, it might be a good time to get in touch with an attorney. Nobody likes the idea of sitting in an attorney’s office – but it might be better than enduring years of a creditor’s attempts to siphon your earnings.

Once a creditor has obtained a judgment and secured wage garnishment, you can’t contest that you owe the debt. Your time for that is over. However, an attorney can help you convince the court that you’ve already paid the debt, or that the creditor screwed up when filing the lawsuit. Believe it or not, it happens more often than most people think.

(The usual caveat: I am not an attorney/financial adviser/credit consultant. I’m just some random guy who has been through a bunch of financial problems. Consult a professional/your mileage may vary/use your own brain. C’mon, I’m just a blogger.)