You are responsible for paying off debts you incur to a variety of creditors. Creditors you do not pay have the option to collect the debt by filing for a wage or bank garnishment through your local court system. Through wage garnishment, your employer gives the creditor a portion of the income you earn each pay period, while bank account garnishment requires your bank to turn over the contents of your checking and savings accounts to the creditor. State laws vary regarding the amount creditors may garnish from your paycheck or bank accounts.
Credit Card Companies
Credit card companies can garnish both your bank accounts and wages -- but the company must win a lawsuit against you before it can seize these assets without your consent. Lawsuits require time and effort on the part of the credit card company. Because of this, not all unpaid credit card accounts result in a lawsuit and garnishment order. New York's Neighborhood Economic Development Advocacy Project notes that credit card companies are more likely to sue you if the amount you owe exceeds $1,000.
Collection Agencies
Like credit card companies, collection agencies must win a lawsuit against an individual before seizing his bank accounts or wages. Collection agencies purchase defaulted debts from other creditors. Because of this, collection agencies sometimes collect debts that are 10 years old or older. Each state sets limitations on the amount of time a creditor has to file a lawsuit against a debtor. Thus, if a collection agency wishes to sue you, it must do so before your state's statute of limitations for doing so expires.
Private Individuals
One common misconception consumers hold is that individuals to whom they owe debts have no recourse should they refuse payment. This is not the case. A private individual can sue you for an unpaid debt the same as a corporation. Should the individual then obtain a judgment through the court, she has the same garnishment rights as any other judgment creditor.
Federal Government
The federal government can garnish your wages without winning a lawsuit against you. This occurs frequently with tax debts that consumers owe to the Internal Revenue Service. Defaulted federal student loans are an example of yet another government debt for which you may face garnishment.
The federal government has yet another advantage over private creditors. It has the right to garnish income that is generally exempt from garnishment by private and commercial creditors, such as Social Security payments and any federal tax refunds you receive.
Child Support Enforcement
Your state's child support enforcement agency has the right to garnish both your paychecks and bank accounts. Not only can your state's child support enforcement agency seize funds, it can seize a greater amount than other creditors.
Title III of the Consumer Credit Protection Act restricts creditors to only seizing 25 percent of your disposable income. If you owe back child support, however, your state's enforcement agency can seize up to 65 percent of your wages -- depending on whether you currently support any additional children and if your child support payments are more than 12 weeks in default.
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