Wages in debt collection

In the sphere of debt collections, there are varying methods a debt collection agency may employ to obtain payment of a delinquent account. Obviously different debt collection companies implement different routes of obtaining delinquent payments. However, overall, most companies around the U.S. utilize the same methodology. An extremely sticky part of the whole collection process comes in the event that a debt collection agency has to utilize garnishment upon a debtor in order to receive payment of a delinquent account.

In the world of debt collections, a garnishment is when a collection agency goes after an indebted party in civil court. Depending on the type of transaction, the debt collection agency will take the debtor to a small claims court. Within the civil court proceedings, if a debt collections company has met and followed all the laws pertaining to debt collection, then the state will rule that the defendant (i.e.: indebted party) shall pay the debt collection company until the debt is paid off.

Laws regarding garnishment are done in accordance with the Federal Fair Debt Collection Practices Act. This Federal act prohibits a debt collection agency from garnishing over 25% of indebted parties total disposable earnings per week. If a debtor’s wage is the minimal federal hourly wage, then a debt collection agency may only garnish an amount equal to 30 times the minimum wage.

Any time a garnishment is placed on the wages of a debtor, that debtor is obligated to pay the debt in full, even if doing so would take the rest of their working life. Thus, the only option an indebted party has in negating the debt, aside from paying it in full, is if that party elects to declare bankruptcy.

When a company garnishes wages, it does this to get payment for a certain amount of debt. However, all debt collection agencies must adhere to certain laws and guidelines. For example, if a debt collection agency takes a person to civil court for wage garnishments, they cannot get more than 25 percent of his total paycheck. In addition, a debt collection agency must look at what the person makes. Once the debt is paid off, then the person will begin receiving his or her full paycheck amount.