Credit card debt and wage garnishment

Wage garnishment for credit card debt needs a court judgment first. The CFPB says most creditors can garnish only after a court rules that you owe the debt. The same rule covers a debt buyer or collection agency that bought the account.

How credit card debt wage garnishment starts

The timeline has three steps: the lawsuit, the judgment, then the garnishment order sent to your employer. If you answer the suit, the card company must prove the debt in court.

If you do not answer by the date on the papers, the court can enter a default judgment, the CFPB warns. Time limits matter too: most states give creditors three to six years to sue, per the CFPB.

The limits

Federal law caps a card garnishment at the smaller of 25% of disposable pay or the amount above $217.50 a week, under the Department of Labor rule. Where your state is stricter, the lower amount applies.

On $700 a week, 25% is $175, which is less than $700 minus $217.50. The employer can send at most $175 a week. The judgment can also grow with interest, fees and court costs.

Settling after a judgment

A judgment does not end your chance to settle. Card creditors often accept a lump sum or a payment plan after garnishment starts, because it ends their court costs.

Get the agreement in writing and make sure it says the creditor will file a release of the garnishment. Then confirm with payroll that the deductions stopped.

Bankruptcy option

A bankruptcy filing stops most collection actions automatically, say the federal courts. Card debt is the kind usually wiped out in Chapter 7. Read bankruptcy and garnishment or run your pay through the calculator.