Do Credit Card Companies Garnish Wages?

Credit card companies can indeed garnish wages, but this action is not immediate and only occurs after a specific legal process unfolds. They cannot directly deduct money from an individual’s paycheck without first obtaining a court order. This legal authorization, known as a money judgment, is a prerequisite for any wage garnishment initiated by a credit card company or a debt collector acting on their behalf. The process involves several steps that ensure the debtor receives notice and has an opportunity to respond before any garnishment can be enforced.

The Path to a Judgment

Before a credit card company can consider wage garnishment, it must pursue a formal legal path to secure a judgment against the debtor. If an account becomes delinquent, the credit card company or its debt collectors typically attempt to recover the outstanding balance through phone calls, letters, and offers for payment plans. These efforts serve as preliminary steps to resolve the debt outside of court.

If these initial collection efforts prove unsuccessful, the credit card company may decide to file a lawsuit against the debtor in civil court. This legal action begins with the filing of a complaint, which details the amount owed and the basis for the claim. Following the complaint, the debtor must be formally served with a summons and a copy of the complaint, providing official legal notice of the lawsuit.

Upon receiving the summons and complaint, the debtor has a limited timeframe, typically 20 to 30 days depending on the jurisdiction, to file a formal response or “answer” with the court. Failing to respond within this period can lead to a default judgment, where the court automatically rules in favor of the credit card company. A default judgment grants the creditor the legal right to pursue collection actions, including wage garnishment. If the debtor does respond, the case may proceed through discovery, potential settlement negotiations, or even a trial. Winning the lawsuit, whether through a default judgment or a court ruling after a trial, results in a money judgment, which is the legal authorization needed to proceed with collection methods like wage garnishment.

Executing a Wage Garnishment

Once a credit card company obtains a money judgment, it gains the legal authority to pursue collection actions, including wage garnishment. The creditor must then apply to the court that issued the judgment for a writ of garnishment, or a similar court order, which directs the debtor’s employer to withhold a portion of their wages. This writ is a formal instruction from the court, activating the garnishment process.

Upon issuance, the writ of garnishment is formally served upon the debtor’s employer. This service legally obligates the employer to comply with the garnishment order. The employer, acting as the “garnishee,” is required to withhold a specified portion of the employee’s disposable earnings and remit these funds directly to the creditor or the court until the judgment debt is satisfied.

The amount that can be garnished from wages is subject to federal and, potentially, state limitations. Under federal law, the maximum amount that can be garnished for ordinary debts, like credit card debt, is the lesser of two figures: 25% of the employee’s disposable earnings, or the amount by which an employee’s disposable earnings exceed 30 times the federal minimum wage. Disposable earnings refer to the portion of an employee’s wages remaining after legally required deductions, such as federal, state, and local taxes, and Social Security contributions. For example, if the federal minimum wage is $7.25 per hour, and an employee’s weekly disposable earnings are $217.50 (30 times $7.25) or less, no garnishment can occur. Garnishments continue until the entire judgment debt, including any accrued interest, attorney’s fees, and court costs, is paid in full.

Safeguards for Debtors

Despite a court-ordered wage garnishment, various federal and state laws provide safeguards for debtors, protecting certain types of income and assets from being seized. Federal law exempts specific sources of income from garnishment by ordinary creditors, including Social Security benefits, Supplemental Security Income (SSI) benefits, disability benefits, veterans’ benefits, and certain retirement and pension benefits. Child support and alimony payments received by the debtor are also exempt from wage garnishment orders. These exemptions aim to ensure individuals retain funds necessary for basic living expenses.

Beyond federal protections, many states implement their own laws that can offer additional safeguards or higher exemption limits for wages or other assets. Some states, for instance, provide enhanced protections for individuals who qualify as “head of household” or who support dependents, potentially reducing the amount that can be garnished. These state-specific provisions can impact the amount of income subject to garnishment.

Debtors also have the right to challenge an improper wage garnishment by filing an objection with the court that issued the order. An objection can be filed if exempt funds are being garnished, if the calculation of the garnished amount is incorrect, or if the creditor failed to follow proper legal procedures. The objection process requires filing written paperwork with the court, often within a short deadline, and may involve a court hearing where the debtor can present their case for why the garnishment should be reduced or stopped.