Can Unsecured Creditors Garnish Wages?

checkbook Unsecured creditors can only garnish your wages if they have been able get a judgment against you in court. That means they will have had to have sued you over your debt and won.

Many unscrupulous collection agencies will try to threaten people with wage garnishment, as if that can happen right away when in fact it cannot. This tactic is not only unscrupulous, it is illegal. The Fair Debt Collection Act, a Federal law, prohibits collection agencies from threatening people with actions that they cannot legally take. 

It is true that once a judgment is entered, one of the ways they can collect is through wage garnishment, but the process to do so is neither quick nor simple. In order to actually garnish your wages, put a lien on your house, or do anything to collect on a judgment, other than ask you to pay up, the collection agency must file a writ of execution before a judge.

Even then, the law protects you by only allowing up to 25% of your take home pay, sometimes less, to be garnished. If you make under a certain amount, no amount of your wages may be garnished at all, and if you’re unemployed or on disability, 100% of your income is likewise protected.

Filing suit, winning, and executing a judgment costs time and money, more time and money, it turns out, than most collection agencies want to expend. Because their profit lies in buying debt at a discount from the original creditor or from other collection agencies, and collecting at near the amount of the original debt, filing suit would eat too much into those profits, both in lawyer fees and man hours required. 

If a collection agency is outside your state, as is most often the case, it is pretty much guaranteed that they won’t ever file suit to collect. It would be far too costly for them to retain an attorney in your state to file suit.

That said, there are so-called "junk debt" buyers who are very aggressive and will file suit if they think they have a reasonable chance of actually getting anything out of you. However, most "junk debt" is just that, junk. It is usually debt that is out of statute, which means that your state’s statute of limitations has already run on it and technically, no law suit may be filed.

Because they know they really have no right to file suit, junk debt buyers count on the ignorance of most people and will go ahead and file suit to scare them into paying. If you have one of these bottom feeders after you, do not let them intimidate you. If you are sued, attend the hearing and present your evidence that the Statute of Limitations has run. The evidence could be as simple as a copy of your credit report, showing the date of your last payment, and a copy of your state’s Statue of Limitations law. The judge will look at your evidence and throw the junk debt buyer and his frivolous lawsuit out of court.

In conclusion, collection agencies usually never do more than send letters and annoy you with phone calls. Even so, it is usually wise to find a way to resolve your debts if you are able to do so. One of the ways you can resolve your debt is through consumer credit counseling and debt management.

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12 Responses to “Can Unsecured Creditors Garnish Wages?”

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  7. Kathy McGraw says:

    @ insurance quote:

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  9. There’s a friend of mine who’s very poor, with very bad credit. There’s a good chance that I won’t be at the end of the month. I have an idea on how I can help him pay for college (an estimated $90,000 for the entire bachelor’s degree) while making a few extra dollars on the side. Since he has bad credit, it will be very hard for him to get a student loan. Staffords may help, but they aren’t a be-all, end-all. So, instead, I’ll offer him a contract where I pay for his college, and he pays me $600 a month, for 240 months, after college. Essentially, I’m becoming his student loan creditor, when no one else will! Of course, what I don’t tell him is that I will turn right around at sell the contract (which, for me, is an accounts receivable) for 80% of its total value.

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