Garnishments and credit card debt: What to know

You need to keep the lights on and feed your family, which means credit card payments could slip to the back burner. Financial hardships can make it tough to keep up with the bills. 

Hardships happen, and when they do, working out a debt relief agreement with your creditor could help you avoid more serious financial consequences. Once you fall behind, creditors will try different methods to get you to pay. Wage garnishment is one of them. Garnishment means that a creditor can take money out of your paychecks to repay what you owe. 

Here's what you need to know about garnishments and credit card debt. 

The information provided in this article is intended for general informational purposes only and shouldn't be taken as legal advice. For personalized legal advice, consult with a qualified attorney licensed to practice law in your state.

Can credit card debt lead to wage garnishment?

Credit card companies can garnish wages for credit card debt, but there's a process they have to go through first. A creditor first needs to bring a debt lawsuit against you and win their case before they can take additional steps to garnish your wages. 

Wage garnishment is usually a last resort for credit card companies when someone owes a balance. It's more common for creditors to try reaching out to you through phone calls or emails first to give you time to pay what's due. 

If you don't pay, that's when you could find yourself with a lawsuit. Even if you’re sued, however, you may still have a chance to head off wage garnishment for credit card debt. 

How does wage garnishment for credit card debt work?

If a creditor sues you and wins, they can ask the court for permission to garnish your wages. If the court approves the request, your employer must, by law, hold money back from your paychecks until the debt is paid. That money is sent to the court, who distributes it to the creditor(s) with the garnishment order.

Now, there are some rules. Wage garnishment isn't a free-for-all. 

• Federal law limits how much of your wages can be garnished, so you can't be left with a $0 paycheck.

• Garnishments for credit card debt come out after other deductions for taxes or contributions to your retirement plan. 

• Some states (North Carolina, Pennsylvania, South Carolina, and Texas) don't allow wage garnishments for credit card debt, but they do allow it for other kinds of debt. 

Wage garnishments stay in place until the balance is paid off. You could remove a garnishment order sooner if you're able to resolve the debt with the creditor. Bankruptcy is another way to put a stop to wage garnishments for credit card debt. 

What are the consequences of wage garnishment?

The most immediate consequence of wage garnishment is the loss of income. Even if the garnishment amount is fairly small, it could still have a big impact on your ability to pay bills and maintain your budget. 

Your job security could also suffer. Federal law prevents an employer from firing you for wage garnishments for a single debt. That protection doesn't apply, however, if your wages are garnished for multiple debts. 

Either situation could lead to an even greater financial hardship if you fall behind on other debts or struggle to pay for basic expenses like rent, utilities, and food. That's a good reason to try to avoid wage garnishment whenever possible. 

How to stop or challenge wage garnishment for credit card debt

If you've received notice of a debt lawsuit, it's important to react quickly. It’s a good idea to get advice from an attorney licensed to practice in your area. You or your attorney will need to file an answer to a summons if the case hasn't gone to court yet. Your answer is a chance to offer a defense to the lawsuit. If you ignore the lawsuit and decide not to answer, your creditor is likely to get an automatic win.

What if you didn't respond when you got the summons and the credit card company has already won the case? These are options that could help you stop a wage garnishment for credit card debts. 

• Negotiate. You could try to negotiate with creditors to accept a lump sum payment for less than what you owe. The credit card company might prefer to take less than the full balance due upfront vs. getting paid a little bit at a time through a wage garnishment. 

• File an exemption request. You might be able to get an exemption if a wage garnishment would cause financial hardship. You'll need to file a request with the court that issued the garnishment order and be able to prove that you should be exempted.

• Dispute the garnishment. You could try to dispute a wage garnishment if you believe that you don't owe the debt or if you were sued for a time-barred debt. When a debt is time-barred, it means that the creditor has waited too long and no longer has the right to sue you. The time limit depends on where you live.  

• Consider bankruptcy. Bankruptcy can put a halt to wage garnishments through an automatic stay. The automatic stay temporarily stops all collection efforts, including garnishment. The stay kicks in as soon as you file a bankruptcy petition and stays in place until your case is either dismissed or discharged. 

How do you know which option is right for you? It could help to talk to a debt expert or an attorney. Either one could help you weigh your choices and explore solutions that fit your situation. 

How to avoid wage garnishment from credit card debt

If you're worried about wage garnishments for credit card bills, you have options. Debt relief is at the top of the list. 

When you settle debt, you get your creditor to agree to accept less than what's owed and forgive the rest. Credit card companies don't have to negotiate, but they may agree to forgive part of your debt to avoid the trouble and expense of taking you to court.

Anyone can negotiate their own debts. But the process can be stressful and intimidating. If you’d prefer to let a professional handle it for you, you can work with a debt relief company and let expert negotiators work on your behalf. Debt settlement could help you get rid of debt faster and for less money compared to making minimum payments. Resolving debts through debt settlement is one way to avoid wage garnishment. It’s a strategy that could help you regain financial stability. 

Schedule a chat with an Achieve debt expert to learn more about how debt relief works and how it could help you.