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.
See Related Blog Posts:

Comments

Post a Comment

Popular posts from this blog

Phantom Debt Collection Scams on the Rise in Illinois

Have you been contacted by a person claiming to be a debt collector who is seeking to recover a debt you allegedly owe? If so, you are not alone. According to a recent report from CBS Chicago , such parties claiming to be debt collectors are on the rise, and they are scamming Chicago-area residents. These alleged debt collectors are part of schemes known as “phantom debt collection scams,” since they involve the attempt to collect on a debt that the consumer does not actually owe. How can you avoid becoming a victim in a debt-collection scam ? What should you do if you have been targeted by a fake debt collector? How Do Phantom Debt Collection Scams Work? Now, you might be thinking to yourself: I would never agree to make payment on a debt that I did not owe. But the scam is not always that simple. Parties at the center of debt-collection scams often target consumers who do actually owe debts (to someone or to some entity), and they prey on the fact that these c...
Read more

Payday Lending and Predatory Lenders in Illinois

If you are in substantial debt in the Chicago area and are living in a paycheck-to-paycheck cycle, you may have taken out a payday loan to make ends meet. While payday lending is illegal in a number of states due to the predatory nature of these loans, it remains legal in Illinois. As a result, many debtors in the state have used payday lenders, and far too many of those borrowers cannot repay what they owe. According to a recent article from Progress Illinois , consumers have filed complaints about payday lenders in the state, illuminating a need for federal rules that address harmful lending practices . Predatory Payday Lenders and Protections for Consumers Due to the perceived predatory nature of payday loans, twelve states in the country have banned these lenders from operating completely, according to a fact sheet from loans.org . The states that currently have laws prohibiting payday lenders from operating include Arkansas, Arizona, Connecticut, Georgia, Mary...
Read more

New Information on Debts That Bankruptcy Cannot Discharge

If you are thinking about filing for bankruptcy in the Oak Park area, it is important to know that certain kinds of debts cannot be discharged in a bankruptcy case. Under U.S. bankruptcy law, these are known as non-dischargeable debts, or exceptions to discharge. There are certain types of debts that have long been identified clearly as non-dischargeable debts, while there are misconceptions about other types of debts that may or may not be dischargeable. As an article in CNBC discusses, the U.S. Supreme Court recently issued a ruling in the case of Bartenwerfer v. Buckley , which clarifies that debts incurred due to another party’s fraud cannot be discharged in an individual’s bankruptcy case. Our Oak Park bankruptcy attorneys can explain the Court’s recent ruling and provide you with additional information on dischargeable and non-dischargeable debts. Supreme Court Says Debt Incurred Due to Another’s Fraud is Non-Dischargeable The recent Bartenwerfer case involved a debtor attempti...
Read more