Ignoring delinquent debt can lead to wage garnishment

The longer your debt goes unpaid, the more likely you'll be forced to pay

By Todd Ossenfort

The Credit Guy

The Credit Guy, Todd Ossenfort, is a credit expert and answers readers' questions about credit, counseling and debt issues. Ask a question 'The Credit Guy' archives

Dear Credit Guy,
My question is this: I live in New Jersey and would like to know if credit cards can garnish wages in New Jersey? Please get back to me ASAP! -- Sharon

Dear Sharon,
The short answer to your question is, yes, New Jersey allows wage garnishment for collection of debts. The rules regarding how your wages can be garnished are as follows: 10 percent of gross pay or 25 percent of disposal earnings (income after federal and state taxes and Social Security), whichever is less, but no execution on gross wages of $154.50 or less a week.

An order to garnish wages must be issued by a court. Several things have to happen, however, before that order is issued. Typically a garnishment order comes at the end of a long debt collection process. First, the debt -- in your case your credit card debt -- is charged off by the original creditor (usually after the account has not been paid for more than 180 days). Next, the account(s) is sold or moved to a collector. The collector will make a concerted effort to contact you regarding the debt to secure payment.

If you are unresponsive, refuse to or cannot pay or have not been located, the collector may decide to sue you in court to collect what is owed. The collector is required by law to send you, the person who owes the debt, notification that you are being sued and how and where you can represent your side of the story to the court. Should you fail to tell your side of the story to the court or if the court sides with the collector, a judgment will be issued to the collector for the amount owed. The collector can then go back to court with the judgment and your employer information to receive an order to garnish your wages.

If you have received information from a collector regarding a lawsuit against you, I recommend that you contact an attorney to represent you. If you decide against hiring an attorney, communicate with the court or attend the court hearing to tell your side of the story. The court will award a default judgment in the amount owed to the collector if you do not attend the hearing or communicate with the court as instructed.

One thing that you can determine is whether or not your credit card debt has passed the statute of limitation (SOL) for collecting a debt in New Jersey. For open accounts such as your credit card accounts, the statute is six years. But, if the collector has already received a judgment for the amount owed, the statute is 20 years. If the SOL has expired and the collector has not yet sued in court, you must be present at the hearing to say that the debt is no longer legally collectible. The court will not recognize the SOL on your behalf if you are absent.

The bottom line is that if a judgment has been issued for your debt, you are not likely going to be able to avoid paying what you owe. My recommendation is that you make payment in full, if possible, try to work out a monthly repayment plan with the creditor or make the necessary adjustments to your spending to live on your wages minus the garnished amount should the garnishment to go through.

Take care of your credit!

See related: Take these steps to avoid wage garnishment, 3 ways to rebuild your credit after wage garnishment, What types of income are protected from wage garnishment?, Bankruptcy protects against wage garnishment, State statutes of limitation for credit card debt

Todd Ossenfort is the chief operating officer for Pioneer Credit Counseling in Rapid City, S.D. Pioneer Credit Counseling has been a member of the Association of Independent Consumer Credit Counseling Agencies since 1997.

The Credit Guy answers a question about a debt or credit issue from a CreditCards.com reader each week. Send your question to The Credit Guy.

Published: June 21, 2010

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