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Credit Card Lawsuit: Facts About Wage Garnishment

Credit Card Lawsuit: Facts About Wage Garnishment

Wage garnishment refers to a legal decree obtained by a creditor, for withholding certain amount from the disposable income of a debtor, who is unable to pay off his debts. The deducted amount is used to pay the amount that an individual owes his creditors. Disposable income is the amount left after subtracting income tax from one’s gross income.

Garnishing wages is an effective tool that allows a creditor to claim the amount of money owed by a debtor. It is for this reason that the Federal and State Laws have set a cap at the amount that can be withheld by the employer (of a debtor) due to the ‘judgment’ obtained by the creditor, under the provision of garnishment. According to the Federal Laws, this cap exists at 25% of the net income earned by the debtor. In case of nonpayment or federal taxes, the Internal Revenue Service (IRS) can even evoke wage garnishing.

Note that apart from credit card debt, wage garnishment is also applicable for the following debts:

  • IRS debts
  • Child Support
  • Student Loans
  • Alimony
  • Taxes

Laws in Wage Garnishment

Law regarding wage garnishment will vary greatly from state to state. However, the general framework remains the same, if one cannot pay the bills, a creditor can file for credit card lawsuit and if they win the case, the debtor has no choice but have his wage garnished until the debt is paid. There are certain cases wherein creditors will compel debtors through legal decree to make appearance in supplemental proceedings to answer several questions in relation to his or her wages, bank accounts, or any assets that may be liquidated.

That said, federal laws and state laws are different so in other states, the amount of wage garnished could be lowered. States like Texas, South Carolina, Pennsylvania and North Carolina do not allow its residents to suffer from wage garnishments unless the debt is related to court-ordered fines, Federal or State taxes, compensatory payments or federal-sponsored student loans.

How to Avoid Wage Garnishment

One can avoid wage garnishment if he or she settles the credit card lawsuit right away. Debtors can also file an appeal to the court to reduce the amount of wage being deducted from them. Finally, you can file for bankruptcy to avoid wage garnishments but this will cause great damage to one’s credit.

 

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