One symptom of the down economy is hitting people where they can feel it most: apparently, wage garnishment has increased significantly in recent months, and, according to a recent New York Times article, leaving some Americans even more strapped for cash than they already were.
What Is Wage Garnishment?
If you fall behind on your bills, your creditors have a few options for collecting the money you owe them. They can:
- Bring a lawsuit: Because you legally owe these debts, creditor lawsuits can use the court system to see that you repay them.
- Repossess your assets: If you’re overdue on payments for a car or appliance, a creditor may turn to repossession, or taking back the item in question.
- Foreclose on your home: If you’re overdue on a home loan, your creditor can essentially repossess your house in what’s called mortgage foreclosure.
- Garnish your wages: If a court rules that a creditor’s claims against you are valid, the creditor may get approval to take money directly from your bank account or paycheck in what’s known as garnishment.
According to the Times, reports of wage garnishment have risen since the economy headed south. Unfortunately, many Americans can’t afford to live on any less than they make. Here’s what you need to know to protect your money.
Avoiding Garnishment
First, it’s important to know that filing for personal bankruptcy stops garnishment. When you enter your bankruptcy petition to the court, an automatic stay takes effect and protects you from all creditor action against you. But if bankruptcy doesn’t seem like the best choice for you, there are other potential ways to prevent losing your wages.
- Read your mail carefully: If you have fallen behind on some of your debts, pay close attention to your mail. If a creditor plans to take legal action against you, it must serve you notice in writing to give you a chance to respond.
- Consider contesting the charges: Whether or not you choose to enlist the help of a lawyer, you may want to challenge any legal action against you. The Times notes that many consumers don’t bother contesting charges and courts are forced to rule in favor of creditors. The article also mentions that some creditors are not legally able to collect on debts because they’ve already sold these debts to third-party collectors.
- Put it in writing: In one case reported, a handwritten letter explaining a woman’s strapped financial circumstances was enough to convince a judge to rule in her favor.
The post Sign of the Hard Times: Wage Garnishments on the Rise appeared first on Clear Finance and Bankruptcy Blog.
