Millions of Americans Affected by Wage Garnishment for Past Debts

Did the recession leave you with growing debts and the inability to make regular payments?  For many Americans, personal bankruptcy can help to alleviate the burden of high credit card and medical debts.  Yet many of us thought the end of the recession would mean a higher paying job and the ability to eradicate some of that burdensome debt.  Some debtors don’t realize, however, that wages can be garnished for unpaid credit card bills, medical bills, and student loans.  According to a recent article in Pacific Standard, millions of Americans have had their wages garnished by creditors in current years.
Rise in Garnishments in the Midwest
A study conducted by ADP, the largest payroll provider in the country, showed shocking data concerning wage garnishment in our country.  Indeed, in 2013, about 5 percent of Americans whose gross yearly earnings range from $25,000 to $40,000 had at least “a portion” of their wages “diverted to pay down consumer debts.”  And when we look at the entire U.S. population, about 3 percent had wages garnished as a result of monies owed.  According to ADP, that’s about 4 million workers across the country.
However, the Midwest has shown the highest rise in wage garnishment, where “over six employees earning between $25,000 and $40,000 had wages seized over consumer debt.”  That’s one in every sixteen people who earns between $25,000 and $40,000 per year.
How much can creditors take when wages are garnished?  In short, it depends on where you live.  Each state has its own laws governing the percentage of your income that can go back to paying your creditors.  Most states permit creditors to take up to 25 percent of your wages (that’s the highest amount permissible under federal law), but then some states continue to charge interest on your debt.  Only a handful of states “largely prohibit wage garnishment stemming from consumer debt,” and none of those states are in the Midwest (they include Texas, Pennsylvania, North Carolina, and South Carolina).
Some states, like Missouri, permit creditors to charge a high interest rate even after they’ve gotten a judgment in court.  In Illinois, once a creditor has won a judgment against you in court, the creditor can’t charge an interest rate greater than 10 percent.
In addition to collecting from paychecks, creditors can also “seize funds from a borrower’s bank account,” which is a “common recourse for collectors,” according to the article.
Garnishment Process for Personal Debts
Where does the process for garnishment start?  For most debts, it begins in a local court.  Beginning a few months after a debtor fails to make payments, a creditor can file a lawsuit.  According to data collected by ProPublica, “the bulk of lawsuits are filed by just a few types of creditors and companies.”  Which creditors and companies tend to file claims?
·      Major credit card lenders, such as Capital One;
·      Companies handling medical debt;
·      High-cost lenders of payday and installment loans; and
·      Debt buyers (companies that purchase debtors’ unpaid credit card bills).
Wage garnishment can seriously affect your bank account and monthly paycheck.  If you have significant debts and have questions about your options, contact an experienced Oak Park bankruptcy attorney.  We can take a look at your case today.
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