No employee wants their hard-earned wages to be garnished – that is, for a portion of their paycheck to be sent directly to a creditor. Unfortunately, it’s all too common for those struggling with debt to be subject to this, which can often make the situation harder as they have even less disposable income after the garnishment is in effect.
Luckily, there are things you can do to prevent having your wages garnished. If you follow the four steps below, you can decrease the chances that your creditors will pursue a garnishment order on you.
1) Stop using credit. Creditors often look at what’s called your “debt-to-income” ratio. This compares the amount of debt you have to your how much money you make, and generally, it’s considered ideal to keep it below 36% (meaning you have $36 or less of debt for every $100 you make.) The higher your debt-to-income climbs, the more concerned creditors will get about your ability to make payments. Also, in reality, when your debt to ratio gets above 50-60% you do significantly increase the chances that you won’t be able to regularly make payments on all of your debts, and creditors will be forced to look at other means of collection from you – one of which is wage garnishment.
2) Take a hard look at your debt. Write down the source and amount of all of your debts, including mortgages, automobile loans, credit cards, student loans, and other money owed. Then evaluate your list to determine which creditors might be most likely to consider wage garnishment. In general, these will be the debts which are most delinquent (overdue.) If the creditor has made attempts to collect the debt from you, this also could increase the risk that they’ll obtain a garnishment order.
3) Contact those creditors. Wage garnishment is considered a last resort for most creditors. It costs them time and money to garnish wages, and they would rather the consumer pay their debt without going through the wage garnishment process. Therefore, most creditors are more than willing to work with you. They may agree to an installment plan with a more reasonable monthly payment, or could even be willing to settle your debt for much less than what’s owed. The important thing is that you’ve contacted them to indicate that you’re willing to pay your debt – and are just having trouble doing so. This alone can prevent wage garnishment in most cases.
4) Get outside help. If you’ve taken the above steps and are still having trouble paying your debts and are facing a potential wage garnishment, it’s time to get outside help. This could include assistance from a bankruptcy or tax attorney, a credit counseling agency, or a debt consolidation company.
- National Foundation for Credit Counseling; www.nfcc.org
- Akridge, Mandy. Negotiate and Settle Your Debts: a Debt Settlement Strategy, CreateSpace, 2011.