Can a Credit Card Company Garnish Wages?

Wage garnishment is a legal procedure where an employer withholds a portion of an individual’s earnings to repay a debt owed to a creditor. Credit card companies can pursue wage garnishment as a debt collection method, but only under specific legal conditions.

Wage Garnishment Overview

Credit card companies cannot directly seize a person’s wages without first obtaining a court order. This legal mandate transforms an ordinary debt into a legally enforceable judgment. When a court issues a judgment against a debtor for an unpaid credit card balance, the credit card company becomes a “judgment creditor,” and the individual owing the debt is the “judgment debtor.” This judgment provides the legal authority for the credit card company to pursue collection remedies, including wage garnishment.

The judgment confirms the legal validity and amount of the debt, establishing the creditor’s right to collect. Without this formal court declaration, a credit card company lacks the legal standing to demand an employer withhold a portion of an employee’s wages. Therefore, a court judgment is the foundational requirement for any wage garnishment action related to credit card debt.

The Judgment Requirement for Debt Collection

To obtain a judgment against a debtor for unpaid credit card debt, a credit card company must initiate a lawsuit. This process begins with filing a formal complaint with the court, outlining the debt details. A summons is then served upon the debtor, notifying them of the lawsuit and the required timeframe to respond. This provides the debtor an opportunity to present their defense or acknowledge the debt.

If the debtor fails to respond within the specified legal timeframe, the court may issue a default judgment. A default judgment is granted without a trial because the debtor did not contest the claim. If the debtor responds and disputes the debt, the case will proceed through the court system, potentially involving discovery, motions, and a trial. The objective of this judicial process is to secure a legal determination of the debt’s validity and the creditor’s right to collect.

A court judgment, whether by default or after contested proceedings, legally establishes the amount owed. It grants the credit card company the authority to use post-judgment collection remedies, including applying for a wage garnishment order. The judgment provides the legal basis for the credit card company to collect that debt through involuntary means.

Implementing a Wage Garnishment Order

Once a credit card company obtains a court judgment, they can proceed with wage garnishment. The judgment creditor must apply to the court for a “writ of garnishment” or a similar court order. This writ is a formal directive from the court that authorizes the garnishment of the debtor’s wages.

Upon approval, the court issues the writ, which is then served upon the debtor’s employer. The employer is legally obligated to comply with the garnishment order. The order instructs the employer to withhold a specific portion of the employee’s disposable earnings and remit those funds directly to the judgment creditor or a designated court official. Employers begin withholding wages from the next pay period following receipt of the order.

The debtor is notified of the wage garnishment order, often through a copy of the writ served by the court or the creditor. This notification informs the debtor that their wages will be garnished and provides details regarding the amount and duration of the garnishment. The employer’s role is administrative, ensuring compliance with the court order and accurately calculating and remitting the garnished amounts until the debt is satisfied or the order expires.

Protections and Exemptions from Garnishment

Federal law provides protections for debtors against excessive wage garnishment. Title III of the Consumer Credit Protection Act (CCPA) limits the amount of an individual’s disposable earnings that can be garnished in any given pay period. Disposable earnings are defined as the amount of earnings remaining after the deduction of any amounts required by law to be withheld, such as taxes and Social Security contributions. For ordinary debts, including credit card debt, the maximum amount that can be garnished is either 25% of the debtor’s disposable earnings for that week, or the amount by which the debtor’s disposable earnings for that week exceed 30 times the federal minimum wage, whichever is less.

Several types of income are exempt from wage garnishment under federal law and many state laws. These include Social Security benefits, Supplemental Security Income (SSI), veterans’ benefits, and certain disability payments. Federal retirement funds, such as those from the Civil Service Retirement System or Federal Employees Retirement System, are also protected from garnishment for consumer debts. These exemptions ensure individuals retain sufficient income to cover basic living expenses.

While federal law establishes baseline protections, state laws can offer additional, more protective exemptions or lower garnishment limits. For instance, some states may allow a smaller percentage of disposable earnings to be garnished or provide broader exemptions for certain types of income or assets. Debtors should understand that while credit card companies can pursue garnishment, there are established legal limits and protected income sources designed to prevent undue financial hardship.