Fail to pay off your credit card debt, and the credit card company can turn you over to its in-house collections department or a third-party collections agency. Both in-house and third-party collectors often employ collection attorneys. Not only are collection attorneys helpful when a company needs to file a lawsuit against a debtor, but consumers typically take communication from an attorney more seriously than communication from a standard debt collector. Although using an attorney increases your creditor's options, it doesn't give it the right to intercept all forms of income that you receive.
Intercepting Tax Refunds
Neither a collection company nor its attorney has the power to intercept and garnish your state or federal tax refund. Only certain government debts, such as unpaid taxes and defaulted federal student loans, are subject to a tax refund offset. Credit card debts are private debts. Thus, no matter what an overzealous collection attorney might threaten, your tax refund is safe from being intercepted by the credit card company or a third-party agency.
Bank Garnishment
Although a collection attorney can't garnish your tax refund directly from the Internal Revenue Service, he can file a lawsuit against you and, if successful, seize your tax refund after you deposit it into your bank account via a bank garnishment.
Any private creditor that holds a judgment against you can request that the court issue a garnishment order granting it permission to seize the debt you owe from your bank account. Although certain forms of income, such as child support and retirement pay, are exempt from this process, tax refunds don't enjoy protection under the law after being deposited.
Lawsuits
A collection attorney's primary purpose is to force debtors to take their debts more seriously. Should this occur, the credit card company or collection agency can collect payments from the debtor without the need to file a lawsuit. Lawsuits are a last resort for creditors who don't wish to incur additional expenses when recovering unpaid credit-card debts.
The chances that you'll face a lawsuit and eventual bank account garnishment increase the higher your debt grows. In general, collection attorneys don't often file suit against debtors for credit card debt that's less than $1,000. Each company's regulations differ, however.
Illegal Threats
A collection attorney is a third-party collector and thus must adhere to the federal government's laws governing debt collection agencies. Under the Fair Debt Collection Practices Act, or FDCPA, debt collectors don't have the right to threaten a debtor with any legal action that the collector lacks the right to take.
Because of this, no debt collector or its attorney can threaten to garnish your tax refund for an unpaid credit-card debt. Any collection attorney that does so violates federal law. Consumers enjoy the right to file lawsuits against debt collectors that violate any of the FDCPA's consumer protection laws when recovering unpaid debts.
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