Consumer and Commercial Debt in North and South Carolina, Texas, and Pennsylvania

The federal Consumer Credit Protection Act places strict limits on garnishment of your wages when a creditor obtains a money judgement against you. Under the Act, the most a creditor can garnish from your wages is 25% of your disposable income above $290 per week. And if your take-home pay is $217.50 per week or less, none of your wages can be taken in order to satisfy a consumer debt.

Four states, however, go even further than that in providing protection from garnishment for all “consumer” and commercial” debts such as credit cards, consumer purchases, payday loans, etc. These states are:

  • North Carolina
  • South Carolina
  • Pennsylvania
  • Texas.

In these states, wage garnishment is NEVER available as an option to collect these “consumer” or “commercial” debts.

What is NOT a “Consumer” or “Commercial” Debt in These Four States?

Let’s start by identifying the debts that are NOT “consumer” or “commercial” debts for garnishment purposes in the four states in question. Clearly any tax-related debt, court-ordered or unpaid child or spousal support, defaulted federally-guaranteed student loans, and court-ordered fines or restitution are NOT consumer or “commercial” debts. All of these debts support a valid wage garnishment order, even in the highly protective states of North Carolina, South Carolina, Pennsylvania and Texas. Indeed, these debts are so special that they cannot generally be discharged in bankruptcy, either.

North Carolina Law Garnishment Laws

In North Carolina, there are two laws that govern debt collection. One is the NC Debt Collection Act, and the other is the NC Collection Agency Act. Like the federal Fair Debt Collection Practices Act (FDCPA), the NC Debt Collection Act defines a “consumer” as a natural person who is alleged to owe a debt undertaken for “personal, family, or household purposes,” as well (in NC) for “agricultural purposes.”

The NC Collection Agency Act broadens the definition of “consumer” to include not only individuals, but also groups or business entities that have incurred any type of debt. As a result, collection agencies must comply with the legal restrictions imposed by these Acts, regardless of whether they are engaged in consumer or commercial collections. Furthermore, though the FDCPA does not govern creditors who collect their own debts, the NC Debt Collection Act does, applying to both the creditor itself and any collection agency brought in to collect the debt.

In sum, except for the debts noted in the previous section, North Carolina does not allow garnishment of an employee’s wages.

Texas Garnishment Laws

Like North Carolina, the state of Texas also imposes significant limitations on creditors seeking to garnish wages. The creditors that can garnish wages in Texas include the following:

  • The government, for unpaid taxes, fines and penalties.
  • Unpaid child support and alimony.
  • Child support ordered by the court, and alimony even if not in arrears.
  • Unpaid student loans that have been declared in default.

Outside this, debts for consumer and commercial loans do not support a wage garnishment order.

South Carolina Garnishment Laws

Like North Carolina and Texas, South Carolina bars wage garnishment orders for “consumer” and “commercial” debt. Also like North Carolina and Texas, South Carolina allows wage garnishment for taxes, fines, penalties, court-ordered child and spousal support, unpaid child and spousal support, and student loans in default. However, South Carolina also has a special and unique law that protects medical providers. This law, called the GEAR PROGRAM, allows hospitals to garnish South Carolina tax refunds (not wages). Otherwise, the laws are the same.

Pennsylvania Garnishment Laws

Like North Carolina, Texas, and South Carolina, Pennsylvania embraces the federal law by barring permitting wage garnishment for taxes, fines, penalties, court-ordered child and spousal support, unpaid child and spousal support, and student loans in default. In addition, Pennsylvania has adopted a few special exemptions of their own, including retirement benefits from municipal, school, and state employee pensions; public benefits or assistance (excluding welfare-type payments), such as benefits from worker’s compensation, unemployment benefits, veterans’ benefits, and crime victim compensation; and benefits from certain life insurance and disability insurance policies. No other debts will support a lawful wage garnishment.


Citations:

North Carolina Law

N.C. Gen. Stat. § 58-70-1 to -155 – North Carolina Collection Agency Act

N.C. Gen. Stat. §§ 75-50 to -56 – North Carolina Debt Collection Act

Texas Law

www.twc.state.tx.us – Texas Workforce Commission

https://texasattorneygeneral.gov/ – Texas Attorney General

South Carolina Law

http://www.scstatehouse.gov/code/t37c005.php

Pennsylvania Law

https://govt.westlaw.com/pac/index?__lrTS=20160209112513517&transitionType=Default&contextData=%28sc.Default%29

Federal Law

15 U.S.C. § 1692a(3),(5) – Fair Debt Collection Practices Act

http://www.dol.gov/whd/garnishment/

http://www.dol.gov/whd/minimumwage.htm

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