Defaulting on your debts can be a dangerous proposition. Just because you’re ignoring your creditors doesn’t mean they’re ignoring you. In fact, they’re probably doing everything in their power to collect, including contacting collection agencies or even taking legal actions against you.
Once the courts get involved, you can quickly lose control of your finances, and a bad situation can get worse. If your creditors know where you bank, they can petition the courts to take what they’re owed directly out of your bank account. They can also garnish your wages, which means your employer will send part of your paycheck directly to the creditor.
When that happens, the rest of your finances can suffer. You may not have enough to pay rent or keep up with your car loans, leading you to default on other obligations.
Here’s what you need to know if your wages are being garnished, including how you can take back control of your money.
How to Stop Wage Garnishments?
The best way to stop wage garnishments is to pay what you owe, but if you had the money available to you, you probably wouldn’t have arrived here. You can talk to a certified Credit Counsellor from a non-profit credit counselling agency about your options. They can help you with personal debt consolidation and negotiate a payment plan with your creditors that will put you in greater control of your finances. Non-profit credit counselling agencies do not provide debt consolidation loans, but they help you find other debt consolidation options that don’t require a loan.
How Does Wage Garnishment Work?
If you have not been making payments on a debt, the creditor may go to court for a seizure summons that will allow them to garnish your wages. Wage garnishment usually happens if you have few assets or very little cash in your bank account. This will allow the creditor to intercept a percentage of your wages on every paycheck until they have been paid back in full.
The creditor can garnish as much as 30 percent of your paycheck and up to 100 percent if you are self-employed, though in that case, the creditor is unlikely to take everything, as that could force you into a different job. It can also be harder for them to collect from those who owe you money.
Thirty percent of your paycheck is a substantial amount, and it can cause you to fall behind on other essential expenses like your mortgage, rent, or car loans.
When Will Creditors Seek Wage Garnishment?
It’s unlikely that most creditors will seek a judgement for a small amount or if you have only recently fallen into arrears. It takes time and money to seek a judgement so that will be balanced against what they can recover. It’s also unlikely that they are aware of what kind of assets you have or what your income is, but they may get a judgement just to ensure that they do not run out of time to collect. If you’ve recently fallen behind on payments, it’s better to act now.
If your wages are being garnished, it’s time to get help.