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Can Credit Cards Garnish Wages?

Chloe Meltzer | May 24, 2024

Chloe-Meltzer
Legal Expert
Chloe Meltzer, MA

Chloe Meltzer is an experienced content writer specializing in legal content creation. She holds a degree in English Literature from Arizona State University, complemented by a Master’s in Marketing from California Polytechnic State University-San Luis Obispo.

Edited by Hannah Locklear

Hannah Locklear
Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Summary: Are you being sued by a credit card company for an old debt? Worried they're going to garnish your wages? Find out if credit cards can garnish your wages and what to do about it.

If you are unable to pay your credit card bills it might feel overwhelming and you may want to just stop paying. This is the worst thing you can do because the debt and interest will only rise. If you do not pay your credit card then your account will most likely be sent to collections, which leads to you being pursued by debt collectors. If you end up being sued then your wages can be garnished or money might be taken directly from your account.

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Everything you need to know about wage garnishment

Wage garnishment can feel scary, but it is actually one of the final steps in the debt collection process. This process begins by you not being able to pay your debts. The creditor may attempt to collect your debt with reminders. After 30, 60, and 90 days you will receive notices, and then one final notice on the 180-day mark. At this point, your debt will be sent to a debt collector. You will most likely need to pay late fees, and your interest rate might increase. Your credit score will definitely drop.

It is good to be aware that debt collectors have a limited amount of time to collect the debt (known as the statute of limitations which is different in every state). This is why you should expect many calls from the collector. After a certain period of time, you may receive a summons and complaint in the mail, which is the debt collector suing you for non-payment. If you ignore the lawsuit you will automatically lose, but even if you fight the lawsuit and lose, a wage garnishment order may be placed against you.

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How wage garnishment works

When wage garnishment is taking place, a certain percentage of each of your paychecks will go directly to the debt collector. This will occur until your debt is paid off. Your employer will be aware, and they will be responsible for directing these funds to the debt collector. Although this can be embarrassing, legally, your employer can not fire you for a single wage garnishment under the Consumer Credit Protection Act. If you happen to have multiple wage garnishment orders then you can be fired for this.

Limitations on wage garnishment

The federal law limits how much money can be taken from your paychecks. When it comes to standard wage garnishments, creditors are not allowed to take more than 25% of your income (after taxes), or the excess of your income that is 30 times the federal minimum wage. The federal minimum wage is currently $7.25 an hour. They must go with whichever is lower.

In some cases, you may not make enough money to have your wages garnished. Also, in some states, the wage garnishment limitations are even more strict. You should check the wage garnishment limitations in your state.

Filing for bankruptcy to avoid wage garnishment

If you file for bankruptcy then you are protected from wage garnishment. After bankruptcy has gone through, point creditors and debt collectors are not legally allowed to garnish your wages. Despite this, you may need to take the extra step to notify your creditors and employer, or the court system to stop a garnishment after declaring bankruptcy.

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How to avoid wage garnishment

There are many ways to avoid wage garnishment, one being simply to make the minimum payment. If you pay off the minimum payment on your credit cards each month (usually 10%) then you will at least avoid your account being sent to collections. This will also help you to avoid wage garnishment.

Although avoiding wage garnishment might sound great, this is still not a great option because you will fall deeper into debt. If you are unable to make the minimum payment then you should contact your creditor immediately and ask to be a part of a hardship program.

Credit cards issuers can garnish your wages

If you do not pay your debt then your wages can be garnished in most states. It is good to note that it will take some time to get to this point. First, the creditor will send your debt to collections, followed by the collections company suing you. If you do not show up in court, you do not settle, or the debt is simply proven to be yours, then an order may be given to the debt collector to garnish your wages. Another form of garnishment is non-wage garnishment. This is when creditors and debt collectors take money directly from your bank account. It is rarer than a wage garnishment.

We wanted to learn more about how much debt collectors and creditors can garnish from consumer wages, so we asked an attorney. Check out the video below to learn more.

Filing a 'motion to vacate' is a legal strategy to challenge unjust garnishments, specifically for consumers who were sued for debt and never received notice of the lawsuit.

Very few consumers are actually considered 'judgment proof', but some types of income, like Social Security, are exempt from garnishment.

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