When you stop paying your credit card balances, the debt you owe doesn't disappear, and interest charges and fees continue to accrue over time. The credit card company or any collection agency it assigns the delinquent debt to has the right to pursue you for the debt through the courts. The court can award your creditor the right to use legal force in the form of wage garnishment when recovering the unpaid credit card debt.
Facts
A creditor can only pursue wage garnishment as a collection tool if your state laws permit the practice. While all states allow the federal government to garnish your wages for an unpaid debt, private companies do not always enjoy the same collection rights. Pennsylvania, for example, allows creditors to garnish consumer bank accounts but does not permit them to garnish wages.
Significance
If a creditor wishes to garnish your wages for an unpaid credit card debt, it must prevail in a lawsuit against you. Doing so provides the creditor with the court judgment it needs to request a garnishment order from the court. Your employer will not withhold a portion of your paycheck merely because a creditor requests that it do so. The creditor must formally serve your employer with a garnishment order before it can seize payment directly from your paycheck.
Considerations
Title III of the Consumer Credit Protection Act regulates wage garnishment practices to protect a portion of your take-home pay. Federal restrictions entitle creditors to only seize a portion of your disposable earnings -- which is the amount you receive after taxes and other government deductions. Because of this, individuals who work part time or earn very little income may not find themselves subject to garnishment -- even if a delinquent credit card debt resulted in their creditor obtaining a garnishment order.
Benefits
A court judgment may give your creditor the right to seize a portion of your wages, but it does not give the creditor the ability to garnish any income you receive other than wages. If you receive Social Security benefits, a retirement pension, unemployment, child support or government assistance payments, this portion of your income will remain unaffected throughout the wage garnishment period.
Warning
Many creditors do not settle for wage garnishment alone. Most states that allow wage garnishment for private debts, such as unpaid credit card debts, also permit creditors to seize funds directly from your bank account. Some states, such as California, also grant creditors the right to place liens on your home or other personal property. A lien provides your creditor the right to repossess the property in lieu of payment. In extreme cases, this can result in you losing your home to foreclosure for leaving your credit card debt unpaid.
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