Todd Ossenfort has been chief operating officer for Pioneer Credit Counseling since 1998. He writes our weekly “The Credit Guy” column, answering reader questions about credit counseling and debt issues.
Dear Credit Guy,
If, for example, my five credit card companies were to file a wage garnishment, can they garnish my pay all at one time? Can my debt still follow me if I will be out of the country for three years until the statute of limitations expires? — Albert
The expression, “You can run but you cannot hide” comes to mind when I read your questions. Leaving the country would most likely keep your creditors from contacting you and demanding to know when you plan to pay what is owed, but the mess created by leaving will be waiting for you when you return.
The statute of limitations to collect on a debt varies from state to state. The statute can be used as a defense against paying a debt if the debt has not been collected within the time allowed by the state. However, the statute does not protect your credit report or FICO score. The debts that you are seeking to avoid will remain on your credit report for seven years from the date the lender charged off the debt from its books.
If you do not pay at all on the five credit card accounts and let them go to collections, your credit score will take a decisive plunge. In addition, even when the accounts are past the statute of limitations and no longer listed on your credit report, you still may be contacted regarding the debts. A good credit history is important for more than just obtaining credit. Your credit history is often reviewed by potential landlords, employers and insurance providers as well.
Because you can’t go back in time to before you had five credit card accounts and leaving the country won’t help your situation, I recommend that you instead determine how you can make good on these debts.
Wage garnishment is regulated by state law with some federal laws that might apply as well. Generally speaking, in regard to your credit card debt, only 25 percent of after-tax wages or the amount by which disposable earnings exceed 30 times the federal minimum hourly wage, whichever is less, can be garnished. So, if all five credit card companies issued an order of garnishment, your employer would be required to follow the state and federal garnishment laws and garnish only the allowable amount from each paycheck. This is definitely not the most desirable situation to find yourself in.
Depending on where you are in the collection process, you may be able to avoid wage garnishment if you can develop a plan to pay what you owe. Start by creating a bare bones (nothing but essentials) spending plan. Once you know what money you have left to pay down your debt, contact your creditors and let them know you are committed to paying what you owe and what you can afford to pay each month. Keep good notes on who you speak with, the date you called and what was discussed. You will want to send a letter to the creditor outlining the agreed upon amount you will pay monthly and send it certified with a return receipt request.
Be aware that your creditor will likely want you to pay more than what you have determined you can afford. Stick to the amount you know you can afford and don’t promise any more. You may find that your creditors are not willing to work with you and will not accept the monthly amount that you are offering. If that is the case, then you will need to gather all the notes you have and any letters that you may have sent to the creditor and prepare to tell your side of the story in court.
A creditor must obtain a judgment from a court in order to have wages garnished. You must be notified of the court date and have the right to defend yourself in the court proceeding. Make sure you show up for the court date with your notes and inform the judge that you attempted to make good on the debt. The judge may rule that the creditor must accept the amount you offered to pay monthly if you can prove that you are offering a reasonable amount based on your income.
If you do need to leave the country, you will be doing yourself a tremendous favor by resolving this matter before you leave.
Take care of your credit!
See related:State statutes of limitations for credit card debt, Credit checks for job applicants become more common, Credit inquiries and your credit score, Ignoring credit card debt can lead to wage garnishment
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