Straffi & Straffi Attorneys at Law: March 2025

Credit card debt can quickly become overwhelming, especially when missed payments lead to aggressive collection efforts. If a balance remains unpaid, creditors may take legal action to recover the debt. One of the most serious consequences is wage garnishment, where a portion of your paycheck is deducted to pay off what you owe. While credit card companies cannot garnish wages automatically, they can pursue a court judgment to enforce collection. Understanding how wage garnishment works, the legal process involved, and the protections available under New Jersey and federal law can help you navigate your financial situation and explore potential solutions.

If you are facing credit card debt and the possibility of wage garnishment, seeking legal guidance may be critical. There are ways to challenge, reduce, or even stop garnishment, depending on your circumstances. At Straffi & Straffi, Attorneys at Law, our team of New Jersey bankruptcy lawyers can help you understand your rights and explore options such as debt negotiation, exemptions, or bankruptcy relief. Call (732) 341-3800 today to discuss your case and take proactive steps to protect your income and financial future.

What Is Wage Garnishment in New Jersey?

Wage garnishment is a legal process that allows creditors to collect debts directly from a debtor’s paycheck. This process typically involves a court order requiring an employer to withhold a portion of an employee’s earnings and send it to the creditor. However, not all creditors need a court order to initiate garnishment.

Federal and state laws set limits on how much of a person’s wages can be garnished. Under federal law, creditors cannot take an entire paycheck, and state laws, such as those in New Jersey, may impose stricter restrictions. Some types of wage garnishments, like those for child support or unpaid taxes, have specific rules and priority over other debts.

Types of Wage Garnishments

Wage garnishment can apply to various types of debt. Some creditors must first obtain a judgment from the court before garnishing wages, while others, such as government agencies, can do so without a court order. Common types of debts subject to wage garnishment include:

Child Support and Alimony: These obligations typically take priority over other types of wage garnishments.
Unpaid Taxes: Federal and state governments can garnish wages for unpaid income taxes without a court order.
Federal Student Loans: The U.S. Department of Education can garnish wages for defaulted federal student loans without a court order.
Court Judgments: If a creditor sues a debtor for an unpaid bill, such as a credit card balance or personal loan, and wins a judgment, they can seek wage garnishment.

Each state may impose additional restrictions, making it essential for employees facing garnishment to understand both federal and state laws that apply to their situation.

Type of Debt	Additional Notes
Child Support & Alimony	Takes priority over other garnishments.
Unpaid Taxes	Federal and state governments can garnish wages directly.
Federal Student Loans	The U.S. Department of Education can garnish wages for defaulted loans.
Court Judgments	Creditors must sue and win a judgment before garnishing wages.

How Does the Wage Garnishment Process Work for Credit Card Debt?

Wage garnishment for credit card debt follows a legal process that creditors must complete before they can collect money directly from a debtor’s paycheck. Unlike government debts, such as taxes or student loans, private creditors must obtain a court judgment before enforcing garnishment. Below is a step-by-step breakdown of how the process works.

Debt Default and Collections: The process begins when a debtor falls behind on credit card payments. The credit card company will try to collect the debt through phone calls and letters, adding late fees and interest penalties as the balance increases. If the debt remains unpaid, the creditor may eventually charge off the account and sell it to a collection agency.
Lawsuit Filed by the Creditor: If voluntary collection efforts fail, the creditor or debt collector may file a lawsuit against the debtor for the unpaid balance. The debtor will receive a summons and complaint, which officially notifies them of the legal action. Creditors, including major credit card companies, often take this step after several months of missed payments.
Opportunity to Respond: Once served with the lawsuit, the debtor has a specific timeframe (e.g., 35 days in New Jersey) to respond or “answer” the complaint. If the debtor believes the claim is incorrect or invalid, they can dispute it in court. However, ignoring the lawsuit almost always results in a default judgment in favor of the creditor.
Court Judgment Obtained: If the debtor loses the case or does not respond, the court will issue a judgment stating that they legally owe the debt. This judgment typically includes the original debt amount, interest, late fees, attorney costs, and court fees. The creditor must obtain this judgment before pursuing wage garnishment.
Wage Garnishment Order Issued: Once the creditor has a judgment, they can request a wage garnishment order from the court or a local sheriff’s office. This order instructs the debtor’s employer to withhold a portion of their paycheck and send it directly to the creditor or an escrow account.
Notification and Start of Garnishment: The employer will notify the debtor before wage garnishment begins. Additionally, the court or creditor will provide an official notice, explaining the garnishment amount and any possible exemptions the debtor may claim. Once garnishment starts, a portion of each paycheck will be deducted and sent to the creditor.
Garnishment Continues Until the Debt Is Resolved: The garnishment remains in effect until the debt is fully paid off, settled, or legally stopped. The balance may take months or years to clear, depending on the amount owed and the percentage deducted from wages. Interest on the judgment may continue to accrue, potentially extending the garnishment period.
Private Creditors Require a Court Order: Most private creditors, including credit card companies, cannot garnish wages without first obtaining a court judgment. This legal process gives debtors opportunities to dispute the claim, negotiate a settlement, or arrange payment plans before garnishment begins. However, some government agencies, such as the IRS or federal student loan servicers, can garnish wages without a court order.

Understanding this process can help debtors take proactive steps to resolve credit card debt before it escalates to garnishment.

How Much of Your Wages Can Be Garnished? (Federal Limits)

When a creditor wins a judgment for unpaid credit card debt, federal law sets limits on how much of a debtor’s wages can be garnished. The Consumer Credit Protection Act (CCPA) ensures that creditors cannot take an excessive portion of wages, allowing debtors to meet essential financial needs.

Federal Wage Garnishment Limits for Credit Card Debt

The maximum wage garnishment for credit card debt under federal law is 25% of disposable income or the amount exceeding 30 times the federal minimum wage ($7.25 per hour), whichever is less.

For example, if disposable income after taxes and required deductions is $1,000 per week, the maximum garnishment is $250 (25%). If disposable income is $290 per week, only the portion above $217.50 (30 times the federal minimum wage) can be garnished. If disposable income is $217.50 or less per week, no wage garnishment can occur.

Limits on Multiple Credit Card Judgments

If multiple creditors secure wage garnishment orders, they must share the same 25% cap. The first creditor in line typically receives payments until the debt is satisfied before the next garnishment begins.

Employer Protections for Credit Card Garnishments

Federal law prohibits employers from firing an employee due to a single wage garnishment. However, if an employee has multiple wage garnishments from different creditors, these protections may not apply.

State Laws May Offer More Protection

States can impose stricter garnishment limits than federal law, meaning some states may reduce the garnishment percentage for credit card debt or exempt a larger portion of wages. However, states cannot set a higher garnishment limit than federal law allows.

New Jersey Wage Garnishment Laws and Protections

New Jersey wage garnishment laws provide additional protections beyond federal limits, restricting how much creditors can take from a debtor’s paycheck. Both federal and state laws dictate garnishment rules, ensuring that individuals retain enough earnings to cover basic living expenses.

Limits on Wage Garnishment in New Jersey

New Jersey law provides additional limits:

If an individual earns no more than 250% of the federal poverty level for their household size, wage garnishment is capped at 10% of disposable income.
If earnings exceed 250% of the federal poverty level, wage garnishment may be up to 25% for debts owed to the state.
A minimum of $48 per week is always exempt from garnishment.
Military pay and benefits are fully exempt from garnishment.

These state-imposed limits offer greater protection to low-income earners compared to federal guidelines.

How Long Can Wage Garnishment Last in New Jersey?

Wage garnishment continues until the debt is fully repaid. The debtor may be able to stop or reduce garnishment by:

Filing an exemption claim with the court.
Negotiating a settlement or payment plan with the creditor.
Filing for bankruptcy, which can halt garnishment under federal law.

Consequences of Wage Garnishment

The most immediate impact of wage garnishment is reduced take-home pay, which can make it difficult to cover living expenses. Additionally, while wage garnishments do not appear directly on credit reports, the underlying delinquent debt is reported and remains on credit records for up to seven years. This can affect credit scores and make it harder to obtain loans or housing.

Beyond financial consequences, wage garnishment can cause significant emotional stress. Seeking legal guidance or working out a resolution with creditors can help minimize these effects.

New Jersey Statute of Limitations and Judgment Enforcement

New Jersey law sets clear time limits on how long creditors have to sue for unpaid credit card debt and how long they can enforce a court judgment. These laws impact debt collection efforts, including wage garnishment, and provide important protections for debtors.

Statute of Limitations on Credit Card Debt in New Jersey

In New Jersey, the statute of limitations for credit card debt is six years. This means that a credit card company or debt collector must file a lawsuit within six years of the last payment or transaction on the account. If they wait longer, the debt becomes time-barred, meaning the debtor can raise the expired statute of limitations as a defense to have the case dismissed.

However, debtors should be cautious when dealing with old debts. Making a partial payment or providing written acknowledgment of the debt can restart the six-year statute of limitations, allowing the creditor to sue even if the original time limit had expired.

Judgment Lifespan and Enforcement in New Jersey

If a creditor successfully files a lawsuit within the statute of limitations and obtains a court judgment, they have up to 20 years to enforce it. This long enforcement period means that once a creditor has a judgment, they can initiate wage garnishment, bank levies, or other collection actions at any time within those two decades.

In some cases, judgments can be renewed, extending the collection period even further. This makes it difficult for debtors to avoid enforcement once a judgment is in place.

What Income Is Exempt from Garnishment? (Protected Wages & Benefits)

Not all income is subject to wage garnishment. Both federal and state laws exempt certain types of income from being seized by private creditors, such as credit card companies, to satisfy a judgment. These protections ensure that individuals retain enough funds for basic needs and that income designated for dependents and essential expenses remains untouched.

Social Security and Federal Benefits

Social Security income, including retirement and disability benefits (SSDI and SSI), is generally protected from wage garnishment by private creditors. A credit card company cannot garnish Social Security payments. However, the IRS and federal agencies can garnish Social Security for unpaid taxes or government debts, such as federal student loans.

If Social Security benefits are direct-deposited, federal law requires banks to automatically protect two months’ worth of Social Security income from being frozen or seized, even if a creditor wins a judgment. Additional funds may also be exempt, but recipients may need to assert their exemption rights.

Other federally protected benefits include:

Veterans Affairs (VA) benefits
Supplemental Security Income (SSI)
Federal railroad retirement benefits
Civil Service Retirement System and Federal Employee Retirement System payments

These benefits are protected from garnishment when deposited into a bank account, with the same two-month automatic exemption rule.

Unemployment and Workers’ Compensation

In New Jersey, unemployment benefits and workers’ compensation are fully exempt from wage garnishment by private creditors. A credit card company cannot take these payments to satisfy a judgment.

Public Assistance and Welfare

Government assistance programs, including Temporary Assistance for Needy Families (TANF), food stamps (SNAP), and other public benefits, are exempt from wage garnishment. These funds are strictly designated for low-income individuals and families and cannot be used to repay consumer debts like credit cards.

Retirement Pensions

Some private pensions are protected under federal ERISA laws, meaning creditors generally cannot garnish pension funds while they remain in the retirement account. However, once pension funds are withdrawn and deposited into a bank account, they may become subject to garnishment if mixed with non-exempt funds.

New Jersey law provides stronger protections for state employee pensions and certain private pensions, shielding them from garnishment in most cases.

Child Support and Alimony (Received by the Debtor)

If an individual receives child support or alimony, those payments are typically exempt from garnishment by credit card companies. These funds are intended to support dependents and cannot be seized to satisfy consumer debts. However, if a person owes child support, those payments can be garnished at higher percentages.

Low-Wage Earners and Part-Time Workers

Federal law protects individuals with very low disposable earnings from wage garnishment. If disposable income is less than $217.50 per week (equivalent to 30 times the federal minimum wage), no garnishment can occur.

Some states also offer extra protections for head-of-household individuals who support dependents, blocking garnishment entirely for those with low incomes. While New Jersey does not have a head-of-family exemption, it does provide wage protection for low-income earners through its 10% garnishment cap for those earning less than 250% of the federal poverty level.

Experienced Legal Help from Straffi & Straffi, Attorneys at Law

Wage garnishment can place significant financial strain on individuals already struggling with credit card debt. While credit card companies must obtain a court judgment before garnishing wages, this process can move quickly, leaving little time to respond. Knowing your rights under New Jersey law and exploring legal options can help you protect your income and find a path toward financial relief.

If you are dealing with credit card debt, lawsuits, or the threat of wage garnishment, legal assistance may be essential. Straffi & Straffi Attorneys at Law can help you challenge garnishment, negotiate settlements, or explore bankruptcy solutions if needed. Take control of your financial situation by calling (732) 341-3800 to schedule a consultation and discuss your options.

from Straffi & Straffi Attorneys at Law https://www.straffilaw.com/can-credit-card-companies-garnish-your-wages/

Straffi & Straffi Attorneys at Law

Monday, March 3, 2025

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Can Credit Card Companies Garnish Your Wages?