How Much Can a Credit Card Company Garnish Your Wages?

Wage garnishment is a legal procedure allowing a portion of an individual’s earnings to be withheld by an employer and directed to a creditor. Credit card companies can pursue wage garnishment to collect unpaid debts, but this action is not immediate. It occurs only under specific legal conditions and involves a structured process to ensure compliance with federal and state regulations.

The Prerequisite for Garnishment

Credit card companies cannot directly garnish wages without first obtaining a court order. The process begins when a credit card company files a lawsuit against a debtor who has defaulted on payments. This legal action seeks to establish that the debt is legitimately owed. If the court rules in favor of the credit card company, it issues a money judgment, which legally confirms the debt.

This judgment provides the legal foundation that permits the creditor to pursue collection actions, including wage garnishment. Without a valid court judgment, a credit card company lacks the legal authority to compel an employer to withhold wages. If a debtor fails to respond to the lawsuit, the court may issue a default judgment, granting the creditor the right to proceed with collection.

Federal and State Limits on Wage Garnishment

Federal law, Title III of the Consumer Credit Protection Act (CCPA), establishes limitations on the amount of wages that can be garnished for ordinary debts, such as those owed to credit card companies. This law dictates that the amount garnished in any workweek or pay period cannot exceed the lesser of two figures: 25% of an employee’s disposable earnings, or the amount by which an employee’s disposable earnings exceed 30 times the federal minimum wage.

Disposable earnings are the portion of gross wages remaining after legally required deductions, including federal, state, and local taxes, Social Security, Medicare, and State Unemployment Insurance. For example, if a weekly pay period’s disposable earnings are $217.50 (30 times the current federal minimum wage of $7.25), no amount can be garnished under federal law.

States can impose stricter limits on wage garnishment than federal law, but cannot enact looser restrictions. Some states enforce lower percentage limits, establish higher minimum wage thresholds, or prohibit wage garnishment entirely for consumer debt. The applicable limit is always the one that offers the most protection to the debtor.

Income Exempt from Garnishment

Certain types of income are protected from wage garnishment. Social Security benefits are exempt from garnishment by private creditors, including credit card companies. This protection extends to Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI).

Disability payments, pension and retirement benefits, and veterans’ benefits are also shielded from garnishment. The Employee Retirement Income Security Act of 1974 (ERISA) provides safeguards for private employer-sponsored pension plans, making them protected from creditors. However, these protected funds can become vulnerable if they are commingled with other, non-exempt funds in a regular bank account after being distributed.

The Wage Garnishment Process

Once a credit card company obtains a court judgment, the next step involves securing a writ of garnishment. This legal document is issued by the court and orders the withholding of wages. The creditor then serves this writ on the debtor’s employer, who is the “garnishee.”

Upon receiving the writ, the employer is legally obligated to comply. The employer must calculate the amount to be withheld from the employee’s wages, adhering to federal and state laws. This portion of earnings is then remitted directly to the creditor or the court.

While federal law does not mandate employer notification, many states have such requirements. The employer continues to withhold and remit funds until the full debt is satisfied or a termination order is issued by the court. Federal law also protects employees from job termination for a single wage garnishment.