Can credit card companies garnish your wages or take away your house?

With the credit card crisis in our country getting out of control, many Americans are faced with the reality of falling behind on credit card payments. Some families are simply unable to pay their credit card payments when faced with the choice of paying this debt or paying a mortgage. This has lead to many Americans asking can credit card companies garnish your wages or take away your house? These are real concerns to those who are delinquent on credit card payments.

Ways to Avoid Delinquency

Before talking about what a credit card company can legally do to you if you stop your payments, let’s talk about the ways that you can avoid becoming delinquent. First of all, use your credit cards wisely. Everyone gets into a situation now and then that is a true emergency when savings or income will not cover a needed expense. This should be the exception, not the rule. Credit cards should be used when the balance can be paid off monthly or in a true emergency.

If you do carry a balance, be sure to stay well below your credit limit. It may seem like a credit limit is there to allow you to use all the credit you want up to that limit, but that is not the case. A credit limit is more like a suggestion of how much debt you can carry based on your income and your expenses. As soon as you get over 40% of your credit limit, your credit score decreases.

Staying well below your limit will also allow you to have wiggle room should an emergency take place. Being responsible with your credit cards will keep your credit score high. A high credit score gets you lower interest rates on car loans, mortgages, and credit cards. It also allows you to make purchases you want on credit without the fear of being turned down.

Lastly, if you do get in over your head and find yourself in a situation where you can’t pay your credit card payments, talk with your credit card companies immediately. Do this well before your payment is due. They will often work with you if you have a lose of income situation or need a few months to catch up. Avoiding the company or talking to them after you have missed one or more payments does not always go so well.

Garnishment of Wages

The answer to this part of the question is yes, a credit card company can garnish your wages. But, there is a lot that happens before you get to this situation. The first thing that will happen when you fall behind on payments is phone calls and letters. The company will call every number they have for you, including your work number repeatedly. This means several times a day. They want to know why your payment is late and when you plan on making a payment.

You can choose to ignore the calls or speak with the company to try and work out a payment plan. If you choose to ignore the calls because you cannot make any kind of payment, your account will eventually (usually within three months) be turned over to a collection agency. At this point it will be much more difficult to negotiate since a collection agency gets paid based on how much debt they collect.

The collection agency will then attempt to contact you and your family to discuss your delinquency. They will call, e-mail, and send letters. They can be sneaky at times, calling family members to get additional contact information for you. If you successfully avoid the collection agency, they will report back to your credit card company and the legal action will begin.

The process that leads to legal action can take 8 to18 months. The credit card company will then sue you for what you owe. At this point you can reach a settlement agreement or continue on in the legal proceedings. A settlement means that you pay them a lump sum much smaller than you owe but then you are free from additional legal action. This will reflect negatively on your credit score.

If you don’t reach a settlement agreement, the judge will decide. If the credit card companies wins, and they most likely will if you do not make any attempts to pay or reach a settlement, they can do whatever the judge approves to get their money. Typically garnishment of wages is on the approved list. And although your home cannot be taken from you, a lien can be placed on your home so that if you sell it, the credit card company gets their money before you get any of the money.

Finding a Solution

There are many solutions available before you come to the place of garnishment of wages or a lien being placed on your home. Don’t bury your head in the sand hoping your financial troubles will go away. You can speak with your individual credit card companies, go to a credit counseling agency, or speak with a lawyer.

Another solution is to work with a credit card company that is willing to work with you. You can look at different credit card companies and what they have to offer online though an online comparison tool. You can use our tool right now to find a company that is easy to work with when times get tough.

No matter where you are it is important to use credit responsibly, spend less than you earn, and do your research to find the best credit card offers.