When debt gets out of hand, wage garnishment is a legitimate fear. However, knowing the “rules” regarding garnishment can alleviate some stress and help you take the appropriate steps toward consolidating and eliminating your existing debt. Whether you are behind your house payments or simply dealing with credit card debt, makes all the difference as far as repossession and garnishment are concerned.
Is Garnishment a Possibility for Unsecured Debt?
To ease your fears a bit, your wages will not be garnished if you are behind a few payments on unsecured debt as long as the court does not have a judgment against you. Unsecured debt is not tied to any collateral. In comparison, a secured loan is one that is connected to property or collateral. A house loan or car loan is considered a secure loan. In this case, your bank or creditor is legally allowed to come and repossess your car or foreclose on your home if you stop paying making your house or car payment. Additionally, if you owe taxes, the government can garnish a portion of your wages.
What Is Considered Unsecured Debt?
An unsecured debt is any form of debt that is not tied to specific property as collateral. Because there is no security guaranteeing repayment of this type of debt, a creditor cannot garnish your wages without a court judgment. Many types of debt fall within this category. The most common types of unsecured debt include:
- Store loyalty credit cards
- Mainstream credit cards
- Student loans
- Telephone and utility bills
- Medical bills
- Personal loans executed without a security agreement or mortgage
- Back rent
According to this list, most debts are unsecured and are backed only by your promise to repay the forwarded amount of credit provided.
In What Case May Wage Garnishment Occur?
Because unsecured debts are not guaranteed by specific collateral, a creditor is not allowed to automatically garnish your wages. If your debt becomes delinquent, the creditor is allowed to contact you to ascertain payment, report the delinquent debt to a credit reporting agency, or file a lawsuit against you. If the creditor files a complaint at the state or federal level, you will be served with a copy of the complaint. After you have been served, you have the right to contest the lawsuit before a judgment is reached. If the complaint is heard and a court judgment is reached, the creditor may be entitled to garnished wages.
Can Garnishment Be Stopped?
In the event that the court has made a judgment against you and your wages have been garnished, you have a few different options. In most cases, the best option for stopping garnishment is filing bankruptcy. If bankruptcy is the route you choose, it is important to use a trusted agency to help you sort through the process and dealings. If you need more information or require assistance remedying your debt situation and avoiding wage garnishment, contact debt settlement professional at Rescue One Financial today for help.