There are some general federal regulations laid down for debt collection by the Fair Debt Collection Practices Act (FDCPA). These regulations are designed to protect consumers and cover personal and household debts. In addition to the FDCPA, state guidelines play a big role in what collection agencies can and cannot do, as well as what they may garnish. Debt collection laws vary from state to state, with some states prohibiting garnishments in cases other than unpaid taxes or back child support. Collection agencies often will work with you to come up with a payment plan, including a minimum payment, to avoid garnishment, and those processes are often murkier.
Creditors vs. Collection Agencies
Creditors and collections agencies are two different things. Creditors are the direct company to which the debt is owed, but creditors sometimes sell off their debts to collection agencies. Collection agencies get to keep a part of the money they collect and so are often more aggressive. Sometimes they threaten to garnish wages when they cannot do so without a lawsuit and a garnishment order, something they typically will not pursue.
Minimum Payments
Collection agencies are often willing to set up a payment plan because they don't want the trouble of a lawsuit if they can avoid it. How they handle that plan is within their discretion, but it is likely that they will work with someone who is willing to make payments and who stays in contact with them. The amount of debt, the number of missed payments and the agency's policies will determine their reaction. With contact from you and some amount of payment--even if it's less than the minimum payment--they can sue for garnishment, but they're not likely to do so. Consistently missed payments, with no contact from you, will lead them to believe that you are unwilling to pay the debt. If they decide that's the case they may take a number of actions, from selling off the debt to filing a lawsuit.
The Process
Creditors and debt collectors may sue you to collect on a debt they believe you owe. The case then goes to court and if they win they'll get a judgment that declares how much you owe. If you receive a summons to appear in court regarding your debt, it is vital that you don't ignore it. The court hearing is a chance to argue your case and fight a garnishment order.
Garnishment Order
A judgment against you allows creditors to get a garnishment order. Such an order can be used to file a lien against your home, to direct your bank to turn over funds or to require your employer to withhold part of your wages, which is wage garnishment. There is also a chance that state and federal law may differ on the amount that can be garnished, in which case the court is required to enforce the lesser of the two. If the amount being withheld for your paycheck causes you hardship, you have the option of filing with the court to have your garnishment payments reduced. However, the time limit for filing could be short--as little as 10 days--so it pays to know your options quickly.
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