The Threat of Wage Garnishment is an Effective Collection Tool

Those struggling with overwhelming debt often worry about the potential of having their wages garnished, but rarely understand the process or circumstances in which this can happen.

Looking for a Debt Solution?

If you are currently looking for solutions to a debt problem, you are probably exploring solutions like debt consolidation or debt settlement. In the back of your mind, however, you are probably more concerned with what happens if you do not find a solution.

Typically, one of the biggest fears is having your wages garnished. Not only does the idea of having your take home pay reduced worry you, the thought of your employer being aware of a debt problem is even more troublesome.

Aggressive collection agencies and creditors routinely use the threat of wage garnishment to help facilitate the collection of a past due debt. Their goal is not to garnish your wages, but rather to scare you into paying the debt back quickly.

The reason they do not rush to garnish your wages is due to the process involved. While the details vary by state, the creditor or collection agency must first sue you for the past due amount and be awarded a judgment and garnishment order. Until this happens, they cannot garnish your wages (with some exceptions for IRS and student loan matters).

So, what happens if they win?

First the judgment is entered and becomes a matter of public record. Unless you dispute this information as being inaccurate, not verifiable, or misleading, it will remain on your credit report for 7 years from the date of filing and will suppress your credit score.

Next, the creditor will provide the judgment and garnishment order to the local sheriff who then presents it to your employer. Your employer will then begin withholding the amount indicated by the garnishment order or be held liable for that amount.

Is There Consumer Protection from the Federal Government?

Federal law limits the amount that can be taken through garnishment of your wages. The amount from one or more garnishments cannot exceed 25% of your disposable income for that week, or the amount by which disposable earnings for that week exceed thirty times the Federal minimum hourly wage, whichever is less.

Disposable income is your gross pay minus any required deductions like state and federal taxes and Social Security withholdings.

Federal law also prohibits your employer from firing you as a result of garnishment for one debt. If your wages are garnished by more than one creditor for more than one debt, you are not protected by this law.

How Can I Avoid Wage Garnishment?

Wage garnishment can be a very disruptive process to both you and your employer. It's best to work with your creditors prior to it getting to this point. Whether you enroll into a debt consolidation program to reduce your payments or investigate debt settlement options, you can and should avoid wage garnishment.

About the Author:
Chris Rocks is the Founder and Executive Director of the Credit Advisory Alliance (CAA). CAA is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.

Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.

He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.