Can Credit Card Companies Garnish Your Wages?

Credit card companies can garnish your wages. But they must follow strict legal procedures first.

You have rights. You can fight back. Understanding the process gives you power to protect your paycheck.

How Credit Card Companies Get Wage Garnishment Rights

No credit card company can take your wages without court approval. They must complete several steps before touching your paycheck.

The required process includes:

• Filing a lawsuit against you in court
• Serving you with legal notice of the lawsuit
• Winning a money judgment from a judge
• Obtaining a court order for wage garnishment
• Sending the garnishment order to your employer

Debt collectors cannot legally threaten garnishment without following these steps. Threatening illegal actions violates federal law.

You have time to respond before any garnishment happens. Our partner Solo helps you fight debt collection lawsuits and protect your income.

Who Can Garnish Your Wages?

Different creditors follow different rules. Some need court orders. Others can garnish without court approval.

Creditors Who Need a Court Order

These creditors must sue you and win first:

• Credit card companies
• Medical providers and hospitals
• Personal loan companies
• Furniture and retail stores
• Auto loan lenders

You have rights in court. You can dispute the debt amount. You can raise defenses. You can negotiate settlements.

Creditors Who Don’t Need Court Orders

Three types of creditors can garnish without suing you.

Child Support and Alimony

State agencies can garnish for unpaid child support automatically. Federal law allows up to 50% of disposable earnings for child support.

The percentage increases to 60% if you support no other dependents. Another 5% gets added if you’re 12 weeks behind.

Federal and State Tax Agencies

The IRS can garnish wages without court approval. State tax agencies have similar powers under state law.

The amount depends on your filing status and dependents. Tax garnishments often take larger percentages than other debts.

Federal Student Loan Collectors

The government can garnish 15% of disposable income for defaulted federal student loans. Private student loans require court judgments first.

Federal Wage Garnishment Limits

Federal law protects most of your paycheck. Creditors with court judgments can take up to 25% of disposable earnings.

Disposable earnings mean income after mandatory deductions. Mandatory deductions include federal taxes, state taxes, Social Security, and Medicare.

State laws may provide stronger protections. Some states limit garnishment to less than 25%. Other states prohibit wage garnishment entirely for certain debts.

Head of household exemptions offer additional protection in many states. You may qualify if you provide most support for dependents.

Steps Before Wage Garnishment Happens

Credit card companies must notify you at every stage. You receive multiple opportunities to respond.

Step 1: The Lawsuit Gets Filed

The credit card company files a complaint in court. You receive a summons and complaint through legal service.

Service methods include personal delivery or certified mail. You have a deadline to respond, typically 20 to 30 days.

Step 2: You Can File an Answer

Filing an Answer protects your rights. Your Answer challenges the lawsuit and raises defenses.

Common defenses include statute of limitations, incorrect amount, or lack of proof. Our partner Solo helps you create a proper Answer quickly.

Step 3: Discovery and Evidence Exchange

Both sides exchange evidence during discovery. You can request proof of the debt.

Credit card companies must provide documentation. Many lawsuits fail when companies lack proper evidence.

Step 4: Trial or Settlement

The case goes to trial if no settlement occurs. The company must prove you owe the debt.

You can negotiate settlement at any time. Settlement often costs less than the claimed amount.

Step 5: Money Judgment Issued

The judge issues a money judgment if the company wins. The judgment states the amount you owe.

You receive notice of the judgment. You may have options to appeal or set aside the judgment.

Step 6: Garnishment Order Requested

The creditor requests a garnishment order after winning. The court issues the order to your employer.

Your employer must comply with the order. Garnishment begins with your next paycheck.

How to Stop Wage Garnishment

You have options even after garnishment starts. Multiple strategies can reduce or eliminate wage garnishment.

Respond to the Lawsuit

Fighting the lawsuit prevents garnishment entirely. Most people lose by default because they don’t respond.

Filing an Answer stops default judgment. You force the company to prove their case.

File a Claim of Exemption

A claim of exemption protects income you need for necessities. You file this form with the court.

You must show why garnishment causes hardship. Valid reasons include inability to pay rent or buy food.

The court reviews your finances. The judge may reduce or eliminate the garnishment.

Negotiate a Settlement

Creditors often accept less than the full amount. Settlement stops garnishment immediately.

Offer a lump sum payment for reduced balance. Creditors prefer quick payment over long garnishment.

Set Up a Payment Plan

Voluntary payment plans can stop garnishment. You arrange direct payments with the creditor.

Payment plans preserve more of your income. You avoid court costs and garnishment fees.

Consider Bankruptcy Protection

Bankruptcy stops wage garnishment immediately through automatic stay. The automatic stay prohibits all collection actions.

Chapter 7 bankruptcy eliminates most credit card debt. Chapter 13 creates affordable payment plans.

Bankruptcy protects your paycheck and assets. Most people keep their property in bankruptcy.

Debts Eliminated by Bankruptcy

Bankruptcy discharges most common debts. Discharged debts disappear permanently after bankruptcy completion.

Common dischargeable debts include:

• Credit card balances
• Medical bills
• Personal loans
• Payday loans
• Collection accounts
• Old utility bills
• Some older tax debts

Bankruptcy doesn’t eliminate child support, recent taxes, or most student loans. Secured debts like mortgages and car loans follow different rules.

Your Rights When Facing Garnishment

Federal and state laws protect you from unfair collection practices. Know your rights to defend yourself effectively.

Right to Proper Notice

You must receive notice of the lawsuit. You must receive notice of the judgment. You must receive notice before garnishment starts.

Improper notice violates your rights. You can challenge garnishment based on improper service.

Right to Challenge the Debt

You can dispute the debt amount. You can demand proof of the debt. You can raise defenses in court.

Creditors must prove you owe the money. They must prove the correct amount. They must prove they own the debt.

Right to Exemptions

Certain income types are exempt from garnishment. Social Security benefits are protected. Disability payments are protected. Veterans benefits are protected.

You must claim exemptions actively. The court doesn’t apply exemptions automatically.

Protection from Retaliation

Federal law prohibits firing you for one garnishment. Your employer cannot demote you or reduce your hours.

Multiple garnishments provide less protection. Employers can fire you for multiple garnishments in some states.

What to Do If You’re Sued

Quick action protects your rights and your paycheck. Follow these steps immediately after receiving a lawsuit.

Don’t Ignore the Lawsuit

Ignoring a lawsuit guarantees you lose. Default judgment leads to wage garnishment.

The creditor wins automatically if you don’t respond. You lose all defenses and negotiation power.

Calculate Your Deadline

Your Answer deadline appears on the summons. Count calendar days, not business days.

Most states give 20 to 30 days. Missing the deadline can result in default judgment.

Gather Your Evidence

Collect documents related to the debt. Find account statements, payment records, and correspondence.

Document any problems with the debt. Note if the amount seems wrong or if you never opened the account.

File Your Answer

Your Answer responds to each claim in the complaint. You admit, deny, or state you lack knowledge of each allegation.

Include affirmative defenses in your Answer. Common defenses include statute of limitations and payment.

Our partner Solo walks you through creating your Answer step by step. You don’t need a lawyer to respond effectively.

Serve and File Your Answer

Serve a copy on the creditor’s attorney. File the original with the court before your deadline.

Keep proof of service and filing. You need documentation that you responded on time.

Negotiate Before Garnishment Starts

Settlement before judgment saves money. You avoid court costs, interest, and garnishment fees.

Make a Reasonable Offer

Creditors typically accept 40% to 60% of the balance. Start with a lower offer to leave negotiation room.

Offer a lump sum if possible. Lump sum offers get better discounts than payment plans.

Get the Agreement in Writing

Written settlement agreements protect you. The agreement should specify the settlement amount and payment terms.

The agreement should state the creditor will dismiss the lawsuit. Never pay without written confirmation.

Request Dismissal with Prejudice

Dismissal with prejudice prevents future lawsuits on the same debt. Dismissal without prejudice allows the creditor to sue again.

Your settlement agreement should require dismissal with prejudice. Don’t accept anything less.

State-Specific Garnishment Rules

State laws vary significantly on wage garnishment. Some states provide stronger protections than federal law.

States That Prohibit Wage Garnishment

Four states prohibit wage garnishment for most debts. Texas, Pennsylvania, North Carolina, and South Carolina ban garnishment for consumer debts.

These states still allow garnishment for taxes, child support, and student loans. Credit card companies cannot garnish wages in these states.

States with Lower Limits

Many states limit garnishment to less than the federal 25%. Some states limit garnishment to 10% or 15%.

Other states exempt more income from garnishment. Your state law applies if it provides better protection than federal law.

Head of Household Exemptions

Many states offer head of household exemptions. Head of household status can completely protect your wages.

Requirements vary by state. You typically must provide more than half the support for dependents.