Sometimes debts get so overwhelming that we simply cannot pay them. Even before you explore Debt Relief Opportunities and in order to get a grip on your personal finances, creditors could take extreme measures to collect their debts.
Wage garnishment is a tool that debt collection agencies use to get you to pay.
“A wage garnishment is a levy,” says Michael Sousa, Associate Professor of Law at the University of Denver’s Sturm College of Law. “It’s a lien on your future wages.”
Usually as a result of a court order, a wage attachment allows the creditor to confiscate part of your paycheck in order to receive the amounts owed to them. In some cases – such as debt with the IRS – a court order is not required to obtain a wage garnishment.
The types of debts that can lead to a wage garnishment include:
- Credit card statements
- Medical bills
- Debt related to a sudden and unexpected event, such as: B. Job loss or divorce
Wage attachment is a relatively common way for creditors to get the money that debtors owe. “Wage garnishments happen all the time,” says Sousa.
However, the consequences of garnishment can be significant on your disposable income and creditworthiness.
“From a debtor’s point of view, garnishment of wages is serious,” says Sousa. “If you want to bankrupt the person and speak to an attorney, file a garnishment against them.”
What does garnishment mean?
the US Department of Labor Defines garnishment as a legal process whereby an employer is required by court order to withhold a person’s income for the payment of a debt.
“A garnishment means that the creditor receives the debtor’s assets from a third party,” says Sousa.
Attachments typically occur after the collection company has repeatedly tried not to make the payment, Sousa says. This can include:
- Telephone calls from the creditor to the debtor
- Written letters asking for payment
- Payment slips sent by the creditor and ignored by the debtor
Sousa says credit card companies will not pursue garnishments until “the situation gets so bad that the creditor realizes there is no way of recovery.”
the follow Attachment of wages can have devastating consequences for debtors and deprive them of significant parts of their income.
“State laws may be different, but with federal law and the state laws I looked at, you can take on up to 25% of a person’s available wage,” says Sousa. “That is much.”
What is the difference between a wage garnishment and a tax levy?
A garnishment of wages should not be confused with a tax levy. A wage garnishment is a levy on your future wages.
“A tax collection doesn’t necessarily apply to your wages, but rather to your assets and personal property,” says Sousa.
For example, an after-tax property tax becomes a lien on your property. When the federal government puts an unpaid tax levy on you, the government gains a lien on all of your property, whether it’s real estate or personal property.
“The idea of garnishment is that you collect from a third party who owns the debtor’s assets, with a tax being levied on an asset or property that the debtor already owns,” says Sousa.
Is garnishment the same thing as a payday loan?
A Payday loan and garnishment of wages are two different things. However, if you don’t pay a loan that you owe a payday lender, the lender could sue you. If the lender wins the case, the court could issue an injunction or judgment against you.
Once this happens, the payday lender can try to have your wages attached.
How does garnishment affect your credit report?
As of 2017, the three major credit bureaus – Equifax, Experian and TransUnion – have had a policy to remove civil judgments and tax liens from the public register of all credit reports.
experience notes that courts do not provide information on garnishment of wages. But that doesn’t mean a garnishment isn’t any Affect your score.
The defaulting account that caused the garnishment of your wages will likely still appear on your credit report, and the creditor can add a note that a garnishment was used to receive payments on the credit card debt.
While this can hurt your score, it is important to note that if a court orders the garnishment of your wages, it is fairly certain that your creditworthiness is already badly damaged.
How can you remove a wage garnishment from your credit report?
If you’ve paid off the debt – or just think the information on your credit report is incorrect or out of date – you can ask the credit reporting agencies to dispute the information with the lender and have the agency update your file.
You can usually do this online, by phone, or by US mail.
If you’ve had a past paycheck and want to make sure your credit reports accurately reflect your current payment status, go to AnnualCreditReport.com and request your free credit report from any of the three major credit reporting agencies.
By law, you are entitled to a free credit report from each of the three agencies annually. However, due to the coronavirus pandemic, will have weekly access to your report until April 20, 2022.
What are the consequences of not paying a garnishment of wages?
If you are the target of a wage garnishment, you have no option to decide whether you want to pay it or not. By law, your employer will make sure the money is withdrawn from your paycheck before you even see it in your bank account.
The employer could decide not to obey the garnishment warrant, but the consequences for the company can be “extreme” according to the Society for Human Resource Management.
In most states, employers who ignore a garnishment can be held liable up to the debtor’s full outstanding debt.
SHRM Urges employers to fully understand and abide by government garnishment laws.
Attachment of wages can seriously affect your takeaway income and make life extremely difficult for most workers who are unlucky enough to have their wages attached. It is for this reason that Sousa urges you to work with your creditors so that garnishment of wages never becomes a reality.
Unfortunately, when the problem arises, many debtors are simply trying to avoid the problem.
“Debtors often ignore informal collection efforts for a number of reasons, mostly because they are underwater and for some reason cannot afford to pay back the debt,” says Sousa.
Be proactive and look for debt relief
No matter what financial hardship you are facing, it is better to be proactive about your debt. Some experts recommend seeking credit counseling, which can help you devise a debt repayment plan. You can also consider working with a debt settlement company that offers free advice.
Sousa recommends speaking directly to your creditor to see what you can negotiate.
“If a creditor is after you for an unpaid debt, the first thing to do is call your creditor and see if you can work out a repayment plan,” he says.
Ask if the creditor would be willing to lower the amount of principal or interest you owe.
“In my experience, most of the time, people can make payment arrangements successfully,” says Sousa.
At National Debt Relief, we pride ourselves on empowering people to regain their financial stability through our proven debt relief program. Contact us and speak to a financial professional who will work with you to find the best option to pay off your debt and help you achieve financial independence.