Can a Credit Card Company Garnish My Wages?

Wage garnishment is a legal procedure where a portion of an individual’s earnings is withheld by an employer to satisfy a debt. Credit card companies cannot directly garnish wages without first obtaining a court order. A specific legal process must unfold before such an action can occur, establishing the validity of the debt and the creditor’s right to pursue collection through this method.

Credit Card Debt and Wage Garnishment Authority

A credit card company operates as an unsecured creditor, meaning the debt is not backed by collateral. Unlike secured debts, where a lender can repossess an asset, credit card companies do not have an automatic right to seize property or garnish wages if an account becomes delinquent.

For a credit card company to garnish wages, they must first secure a court judgment against the debtor. This judgment legally confirms the debt and grants the creditor the right to use collection methods, including wage garnishment. Wage garnishment is a tool for enforcing a judgment, not a primary collection method.

If the debtor does not respond to the lawsuit, the court may issue a default judgment, which automatically rules in favor of the credit card company. This judgment then serves as the legal basis for the credit card company to pursue post-judgment remedies, such as wage garnishment.

The Judicial Process Leading to Garnishment

The path to wage garnishment for credit card debt begins with the creditor initiating a lawsuit against the debtor. This first step involves the credit card company, or a debt collector acting on its behalf, filing a formal complaint with the appropriate civil court. The complaint outlines the details of the debt, including the amount owed and the basis for the claim.

Following the filing of the lawsuit, the debtor must be formally notified through a process known as “service of process.” This legal notification ensures the debtor is aware of the pending legal action and has an opportunity to respond. Proper service of process is a fundamental requirement for the lawsuit to proceed and for the court to establish jurisdiction over the debtor.

Upon receiving the lawsuit, the debtor has a limited timeframe to file a formal response with the court. Failure to respond within this period can lead to a default judgment against the debtor, meaning the court automatically rules in favor of the credit card company without a trial. If a response is filed, the case may proceed through various stages, potentially leading to a trial or a settlement.

If the court rules in favor of the credit card company, either through a default judgment, summary judgment, or after a trial, a money judgment is issued. With a judgment in hand, the creditor can then apply to the court for a writ of garnishment, which is a court order directing an employer to withhold a portion of the debtor’s wages. This writ is then served on the debtor’s employer, legally obligating them to comply with the garnishment order.

Federal and State Wage Garnishment Protections

Even after a court order for wage garnishment is issued, federal and state laws impose limits on how much of an individual’s earnings can be withheld. The federal Consumer Credit Protection Act (CCPA) sets a maximum amount that can be garnished for ordinary debts, including credit card debt. Under the CCPA, the amount garnished in any workweek cannot exceed the lesser of 25% of the employee’s disposable earnings or the amount by which disposable earnings exceed 30 times the federal minimum wage. Disposable earnings refer to the amount of pay remaining after legally required deductions, such as federal, state, and local taxes, and Social Security contributions, have been made.

Many states have enacted their own laws that provide debtors with greater protection than the federal CCPA. These state laws may impose stricter limits on the percentage of wages that can be garnished, establish higher minimum protected amounts, or, in some cases, prohibit wage garnishment for consumer debts entirely. For instance, some states do not permit wage garnishment for consumer debts like credit cards, except for specific obligations such as child support, taxes, or federal student loans. When both federal and state laws apply, the law that results in a smaller garnishment amount takes precedence, offering the debtor the most favorable protection.

Certain types of income are exempt from wage garnishment, regardless of federal or state laws. These protections aim to ensure individuals retain access to funds necessary for basic living expenses. Common examples of income sources that are often protected include Social Security benefits, disability benefits, unemployment benefits, welfare payments, and certain pension income. These exemptions are designed to safeguard essential income streams, though specific rules and processes for asserting these exemptions can vary.