USA   |   UK   |   Australia   |   Canada
ADVERTISEMENT

Ignoring debt collection lawsuit can lead to wage garnishment

If you're a no-show in court, your paycheck, bank accounts can be seized

By Todd Ossenfort

The Credit Guy
'The Credit Guy,' columnist Todd Ossenfort
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

Question for the CreditCards.com expert

Dear Credit Guy,
The credit card people sent garnishment papers to my work, and within two days, they took money out of our checking account and left us with $13. My husband is talking to a lawyer about possibly -- or probably -- filing for bankruptcy. Can they just keep taking money out of our checking account without us knowing? I have 10 days to send in the paperwork for garnishment, but I didn't know that they would take money out of our checking account. My husband has been looking for a job for the past four months, so I am the sole breadwinner for the family, and we have two children, too. He does, however, get disability once a month to pay for an injury while he was overseas. (He is retired from the Army after 21 years.) Please advise. -- Laura

Answer for the CreditCards.com expert

Dear Laura,
Your credit card company could only send garnishment orders to your employer and your bank if the company had been granted a judgment from a court for money owed to them by you. You should have received information from your credit card company or other debt collector explaining that it filed a suit to collect what is owed them, along with the court date to appear or date to submit a response. The valuable lesson to be learned here is this: No matter how dire the circumstances, you always need to respond to court documents. By not responding, things tend to escalate from bad to worse.

The garnishment papers sent to your employer, and the money siezed from your checking account, are two separate issues.

First, let me address the money taken from your checking account. In order for money to be removed from your checking account, your bank would have to be presented with an order from a court that includes your personal information, your account number and the amount of the debt for which the order to levy your account was granted. It is quite likely that the amount taken from your checking account did not completely satisfy the total amount that you owe.

If the garnishment order sent to your employer is from the same creditor as the order sent to your bank, it could be that they were both granted from the court to collect the debt owed. In order to remove additional money from your checking account, the creditor would need to get another order from the court. It is possible that the creditor will simply collect the remainder of what is owed using the garnishment order sent to your employer. What this means to you is that you can expect your employer to withhold up to 25 percent of your "disposable earnings" --defined by the federal government as the amount of earnings after federal, state and local taxes, Social Security, unemployment insurance and state employee retirement systems have been deducted.   

I would recommend that you follow the advice of the bankruptcy attorney with whom your husband is meeting. If you do decide that filing for bankruptcy is the best option for you, once the suit is filed, the garnishment order will be removed and all other collection activity will cease. In the meantime, you may want to avoid depositing any additional funds into your checking account until you know for sure if the account will be levied again or until your bankruptcy case has been filed.

Take care of your credit!

See related: How wage garnishment works -- and how to avoid it, Bankruptcy protects against wage garnishment, When bank accounts are seized, take these three steps

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: February 7, 2011



Join the discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.

Three most recent The Credit Guy stories:

Share This Story




Follow Us!


Credit Card Rate Report

Updated: 10-30-2014

National Average 15.09%
Low Interest 10.37%
Balance Transfer 12.82%
Business 12.85%
Student 13.14%
Cash Back 14.98%
Reward 15.07%
Airline 15.46%
Bad Credit 22.73%
Instant Approval 28.00%

ADVERTISEMENT
ADVERTISEMENT