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Creditors and Garnishment: Two words you don’t want to hear in the same sentence

By: David Benton
Published: November 2006

It’s not fun owing money, but it’s even less fun owing money and not being able to pay it back. When this situation arises, people get an eye-opening look at the harsh reality of what creditors will go through in order to get the money that is owed to them.

Creditors have three options at their disposal for getting the money owed to them:

A lien is a tool used by creditors that allows them to take your property, which in most cases would be your home, or in some cases, your car. Of course, not everybody owns property and many people own their vehicles outright or didn’t offer them up as collateral to the creditor. When this is the case, creditors move down the list to wage garnishment.

How this works is that your employer will receive a legal order, which orders them to withhold a certain amount of money from each of your paychecks. This amount can be as high as 25%, but by law, can be no higher. After your employer has made deductions for federal and state taxes, the stipulated garnered percentage is then also removed, and you get what’s left.

Is there a way to avoid this? Sure. You can quit your job. However, if you’re like most people, this is probably not an option. Of course, it is not unheard of to meet people who jump around from one odd job to the next; leaving once the creditor learns of their new employment and sends a wage garnishment order to the new employer. It seems like this type of life would be a hassle, and I’m sure it is, but I worked with a woman once who had a friend who’d been doing it for 15 years! Talk about being determined to not pay off your debts!

However, if you decide to play hardball with creditors this way, they can do the same by issuing a levying order against your bank account. When this is done the bank withholds all funds from you, and the creditor can then take everything in your accounts if they choose, leaving you with nothing, and they can continue to do this with any bank you use until they are fully repaid, leaving you with the only option of not using a bank, another very inconvenient way to live.

Many people do genuinely fall on hard times and can no longer afford to pay off outstanding debts. For these people there is the option of filing for bankruptcy in order to be protected from the scenarios above; however, with bankruptcy laws much stricter than they used to be, it is no longer so easy. Probably the best way to deal with creditors is communication. Creditors are much more amenable to deal with when they know that you’re genuinely interested in paying back what you owe. It’s when you stop accepting their phone calls and completely ignore them that they become aggressive and pursue the options above.

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