What is Garnishment and How to Stop Debt Collection Scams

Creditors have several ways to collect bad debts from people who do not pay their bills. One of the last and most harsh options is wage and bank account garnishment. Most garnishments are by court order to collect a debt. The federal government, such as the IRS, may collect on a federal debt without going through the courts.

Wage garnishments are taken from an employee’s paycheck to satisfy a debt or legal obligation. Garnishments are typically a percentage of an employee’s paycheck rather than a specific amount. It is found that nearly 7 percent of all US employees have at least one garnishment on their credit records.

Two types of garnishment exist: The first is Federal garnishments consisting of bankruptcies, creditors, plus tax levies, administrative, and student loan garnishments from federal-level debts. The second type of garnishment is at the state level, consisting of child support, alimony, state taxes, and fines. 

Garnishment calculations are complicated based on the type of garnishment and the state in which it is given. Garnishment deductions are based on an employee’s disposable income, including all wages, salaries, commissions, and bonuses. In some cases, retirement income may be included in the calculations.

Consumer Credit Protection Act

The Federal Wage Garnishment Law’s CCPA Title lll provides a long list of guidelines and procedures for employers and creditors to follow. Garnishment laws allow creditors to take up to 50% of an employee’s compensation if they support a spouse or child and 60% if not. 

Title lll sets the maximum amount that may be taken from a worker’s paycheck in any given workweek. For a typical garnishment, the lesser of two amounts will apply 25% of the employee’s disposable income or an employee’s disposable earnings greater than 30 times the federal minimum wage. (currently $7.25 per hour) 

How to Stop Wage Garnishments

Once the employee has received a “writ of garnishment,” action must be taken quickly, or the garnishment will proceed till the debt and all fees are paid. There are a few things an employee can try to stop a garnishment.

• Pay the debt in full: this may not be an option for most people; however, borrowing money from a friend or family member should be considered.
• Work with the creditor: once the debt goes into garnishment, it is usually handled by third-party collection companies. Think about hiring a lawyer to handle negotiations.
• File an exemption claim: try reducing the garnishment amount by claiming some of the income is exempt. Provide proof that the garnishment would impact necessary living expenses. 
• Challenge the garnishment: there will be a handful of days to challenge the validity of the charge, so act fast.
• File for bankruptcy: if your financial situation is dire, filing for bankruptcy may be the long-term answer. Consult with an attorney to ensure this course of action is correct for you and your family.

Debt Collection Scams

Dealing with a delinquent account or several of them is challenging for anyone. Knowing if the person contacting you is trying to collect a debt and is legitimate may be another challenging circumstance. Debt collection scams are plentiful because of the vulnerable position of their target. People who have accounts sent to a collection agency are in a dangerous and susceptible position.

Those with outstanding collection debt need to be on the lookout for fraudsters. The Federal Trade Commission reports over 150K collection reports were filed in 2021 alone, with 50.1 percent of these relating to abusive practices. 

It can be alarming when a person receives a call from a debt collection service. Here are a few red flags.

• If the debt collection person uses strong-arm tactics, ensure the debt is yours. Have the agent give you an account number, the origin of the debt, and any other personally identifying information. By law, the agent must provide the creditor’s name and the amount owed. 
• Pressure tactics are always the first and foremost means of collecting a debt. Scammers will make you feel irresponsible and create a sense of urgency to pay the debt quickly. Legitimate collection agencies may be aggressive; however, scammers use fear to get their targets to act quickly and irresponsibly.
  • If a collection agency threatens you with jail time or something worse, that is a violation of your rights and a significant red flag that should be reported. The Fair Debt Collection Practices Act forbids debt collectors to harass, oppress, or abuse to collect a debt.
• Failure to offer contact information is another red flag debtors need to be aware of. Reputable collection companies have websites and reviews that people can research and find contact information. Scammers point conversations away from contact information and back to your debt.
• In every instance, a scammer wants you to pay your debt by money transfer or a debit card. These forms of payment are untraceable and preferred by predators. Be aware of any collection service that demands a payment out of normal channels. 
• If the predator threatens to tell your employer, family, or co-workers, this is against the law. Collection companies can not intimidate a debtor by telling them, “we will go to your family to collect this debt.” Federal law only allows a collection company to inquire about your location. 
• If your debt is in the hands of a debt collection agency, there must be written notification of the debt. Within five days of first contact with a debtor, a collection agency must send a letter documenting the debt.

The Federal Trade Commission continues to startle everyone with updated fraud statistics. It is reported that fraud losses increased an astounding 70% over 2020, and data shows Americans lost nearly $5.8 billion. 

Final Word

Everyone gets behind on their bills at some point during their lives. How we handle the pressures is a telling sign of whether the amount is paid back. Predators are everywhere, and we must be on the lookout for these scammers. Never compound a bad debt problem by taking the easy way out.