With Americans swimming in debt, the issue of wage garnishment routinely arises in the workplace and courts. Credit card companies seek garnishment when you are delinquent in your payments but have income that affords handling the debt. This is completely legal and is a process that protects the rights of credit card companies to receive balances owed.
Due Process
Credit card companies may garnishee your wages, but to do so they must exercise due process. This means they have to make legitimate attempts to inform you of your delinquency and give you time to respond to inquiries. They have to show that you in fact owe the debt. In most cases, garnishment requires completion of due process through obtaining a court judgment against you. The judgment gives the companies the legal right to approach your employer and make arrangements for the garnishment.
The Process
The process of garnishment involves six major steps. The first is missing payments on your account --- credit card companies can't garnishee your wages unless your account is delinquent. The credit card company then sells your debt to a collection agency, which may sell the debt to another collection agency. If the collection agency can't collect and doesn't want to resell the debt you owe, it files a lawsuit against you. The court then determines the validity of the collection agency's claims and provides a judgment against you requiring garnishment of your wages. Once the court issues the judgment, you are notified, and your employer also is contacted and instructed to withhold the amount stipulated in the court order. Finally, the accounting or human relations department at your company actually garnishees your wages to comply with the order.
Garnishment Amount
Current American law states that credit card companies can garnishee in one of two ways. They can garnishee up to 25 percent of your disposable income, or they can garnishee the amount by which your disposable income is greater than 30 times the federal minimum wage. For instance, if you earned $1,000 at $7.25 per hour, the maximum garnishment under method one would be $250. If you used the federal minimum wage method with a $7.25 hourly rate and $1,000 of income, the maximum garnishment would be $1,000 - (30 x $7.25), or $782.50. However, the law further states that,when state garnishment law is different from federal law, courts may order the lesser amount provided through the two available calculation methods.
Freezing Wages and Accounts
Credit card companies cannot completely freeze wages through an employer, as your employer has a legal obligation to pay out funds for hours worked, and because laws generally make allowances for coverage of basic living expenses. However, they can freeze your bank accounts, particularly if you are unemployed and have no wages to garnishee. When they freeze your accounts, they get a court order that forces your bank or other financial institution to deduct as much nonexempt money as possible from the accounts to pay some or all of your debt. If a credit card company freezes your bank account, you can't spend any money out of the account, which sometimes is more disruptive than having a percentage of your earnings deducted through garnishment.
Considerations
If you feel that a garnishment judgment places unnecessary financial hardship on you and makes meeting regular living expenses difficult, you can petition the court to adjust the garnishment order. You also can negotiate with creditors before a lawsuit or declare bankruptcy to avoid garnishment. Additionally, although you may be embarrassed by the fact your employer knows about your financial troubles, your employer cannot fire you for an initial garnishment order. This protection doesn't apply to subsequent garnishment orders, however.
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