Garnishing is a court order that allows debt collectors to seize upon 25% of your wages to cover your credit card debt. This happens when your credit card account defaults after you fail to pay your credit card debt on consecutive billing cycles. On average, 10% of Americans between the ages of 35 and 44 get their wages garnished due to debt, which includes credit card debt.
What Happens When You Stop Paying Your Credit Card Bill?
When you stop paying your credit card bill, late fees and higher interest rates are added to your debt. If you keep failing to pay your installments, typically for 6 months, your credit card account is likely to default and shut down. As credit card debt is unsecured, so no asset of yours is automatically liable to be seized by the credit company.
However, credit card companies often sell your debt to debt collection agencies at pennies on the dollar rates and collection agencies have the professional resources to recover all or most of the debt. One of the instruments that comes into play is garnishment. The collection agencies get a legal garnishing order against your wages or bank account to cover for your debt.
How Long Before A Creditor or Collector Can Garnish Wages?
You can expect your wages to be potentially garnished 5-8 months after your creditor has sold your debt to a collection agency, and the creditor typically takes 6 months to sell your debt after your credit default. Creditors usually try other methods before selling your debt to collection agencies. These involve raising interest rates to encourage you to timely pay your bills but the account defaults if these measures fail.
When the debt is sold to the collectors, they file for a legal garnishing order which takes 3-4 weeks for hearing. The collectors are also required to notify the borrower regarding the matter during this period. Given the conditions, the collectors usually have a strong case and winning it can take about 5-8 months after which, there’s a 15 days waiting period before collectors can start implementing the garnishing order. Defauting leading to court order of garnishing wages overall takes 12-15 months.
How Much Income Can Be Garnished For Credit Card Debt?
The federal law states that no more than 25% of your disposable income can be garnished. If you earn $50,000 a year. The amount of income that would be garnished for your credit card debt would be $12,500.
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