Wage garnishment is a judgment by the court making it mandatory that a portion of your income be applied to your debt balance. More than 90% of people who are sued by creditors simply do nothing. Of course, this is probably the worst thing you can do when faced with a judgement. Often this results in wages garnished, and little recourse for the consumer.

Before going any further, let’s discuss what a garnishment judgment is. You have a while, usually 20-30 days depending on your jurisdiction, after you are served with a lawsuit to respond. If you still don’t submit an answer to the lawsuit, the court can enter a default judgment giving the debt buyer everything they are asking for.

You didn’t respond, or appear to defend yourself so you have no way of winning. If you haven’t responded or appeared, the creditor wins the case by default. Once this happens, they can legally garnish your wages and pursue additional legal action.

It goes without saying that you should respond promptly and accurately.

How much of your wages can be garnished?

The extent of wage garnishment depends upon the disposable income. A garnishment is determined based on income and disposable income. There are limits to these garnishments, of course. The limits vary state by state and are affected by the type of loan being collected.

In general, either 25% or the amount by which your weekly income exceeds 30 times the federal minimum wage which is currently $7.25 an hour. Whichever of these figures is less is garnished from your paycheck. This garnishment goes directly to the creditor who’s placed it, which could represent credit card and medical bills, personal loans and most other consumer debts.

For example,

• If the weekly disposable income is $290 or more, 25% is collected towards wage garnishment.
• If the disposable income is between $289.99 and $217.51, the amount above $217.51 can be ripped off.
• If it’s $217.50 or lower, the garnishment is restricted.

What to do when you get a garnishment judgment? Is there any recourse?

The first thing to do is to read the judgment carefully to verify the information to ensure that it’s, in fact, your debt and not something you already paid. If it is, calculate the amount which will be garnished and how it will impact the financial situation. If it seems difficult, consult a consumer law attorney or local legal aid to determine the best option for your situation.

If you are facing the garnishment, you should resort to the following:

Contact the creditor or collection agency to validate any debt you are asked to pay and ask for proof of the obligation.
You should be ready to respond to any court summons. Failure to turn up at the court hearing will likely treat a garnishment judgment against you.
To avoid wage garnishment, explore all available alternatives including debt settlement and debt consolidation.

Wage garnishment generally continues until paused by the court order or until the debt is paid in full. It is indeed better to be proactive and try to avoid garnishment by working out a repayment plan with the creditors. It should be noted that if a written answer to the lawsuit is not submitted, it will result in a default judgment for the creditor.

To do list when you actually face a writ lawsuit for wage garnishment:

You actually have a few alternatives when there is no slip-hole and you face the writ lawsuit for wages garnishment judgment.

• You can ask the court to set aside the default judgment and give you an opportunity to challenge it.

If you believe that there is seriously some mistake done by entering a default judgment against you, you can fight the lawsuit stating any of the below 6 genuine reasons of Rule 60.

• Excusable neglect
• Freshly discovered evidence
• Fraud
• Void judgment
• Discharged judgment
• Any other specific reason which justifies release from the default judgment.

You can settle the debt with the creditor for an amount less than what the default judgment is for.

You actually lose the leverage of settling the debt once the judgment is entered. So, now prepare and establish a budget of whatever you are able to do to settle the debt in a lump sum or on a monthly basis.

Finally, you can opt to eliminate the default judgment completely by filing for bankruptcy.

While bankruptcy affects your credit score negatively, sometimes it’s the only option left if the lawsuit being dealt with is only the beginning. It will eliminate most of the debts, as well as the judgment.

The post Are your wages garnished thanks to a past due debt? appeared first on Consumer Debt News.

Bankruptcy is an authorized process supervised by national bankruptcy courts. It’s intended to help individuals and businesses remove all or part of their debt and can also help them save a share of what they are in debt of. Most business or individuals that make this decision, understand that afterwards, they’ll have to recover from bankruptcy. Two main objectives of filing are:

• Fair payment of the legal claims of the creditors done by a reasonable distribution of debtor’s possessions
• To provide the insolvent a chance for a fresh start.

Types of Bankruptcy:

Voluntary bankruptcy: It can be brought upon itself by an insolvent debtor.

Involuntary bankruptcy: It can be forced by court order on the request of creditor’s petition.

Bankruptcy might help you become free of your debt, but it’s significant to understand that declaring bankruptcy has a serious, long-term effect on your credit.

Not to mention, it will persist on your credit report for a minimum 7 to 10 years, affecting your chances of opening new lines of financing or credit. When you are approved for new lines of credit, usually the interest rate will reflect the bankruptcy.

How it affects your credit

The chief matter that discourages most individuals from filing bankruptcy is the damaging effect it has on their credit. It’s 100% true that a bankruptcy can stay on your credit report for up to ten years and it hurts your credit score. Though, not filing for bankruptcy and letting your debts to go further into collections will also destructively impact your credit.

Liable on the kind of bankruptcy you file, Chapter 7 or Chapter 13 bankruptcy, your credit score will decline anywhere from 150 to 230 points. This is sufficient to take a good credit score down to a reasonable or deprived one. Meanwhile, most lenders choose whether or not to extend you credit based on your credit score. A bankruptcy will make it much harder initially in obtaining a home loan, auto loan or credit cards.

The main remedy for this is time; however, there are extra actions you can take to absolutely improve your credit report and score. Eventually, if you succeed to manage your new debts well, your score will progressively increase. And, in time you’ll be running your financial life effectively, even if the bankruptcy is still visible on your report.

How long will it take to recover from bankruptcy?

Most people are worried about Bankruptcy as they feel it will take 7 years or more to improve from the wounds done to one’s credit. The truth is it can take a number of years for credit to recover. If you are extremely diligent with rebuilding your credit, it could be significantly shorter.

Traditionally, people who file for bankruptcy need to sustain themselves without the use of credit cards or loans. For many, this is difficult and what got them to this point in the first place. The first types of offers you’ll qualify for are high interest, bad/no credit loans and cards. The interest rates on these offers make it very difficult to keep up with, and can lead right back to square one.

First, if you think that you are going to declare bankruptcy, there are few initial actions which will be very helpful.

Step-1:

If your credit cards are open and working, it’s suggested to pay one or more off and leave it/them out of Bankruptcy. If you own a car which is being funded then it would be best to keep it away from Bankruptcy. These things can be your positive trade lines in order to get out of Bankruptcy.

Step-2:

After you receive your discharge papers, you should follow a few more steps. You can get a secured credit card from a major bank. If they refuse then get one through First Premier or Capital One.

Why not just try to get a normal credit card?

Well, in short, you can’t for a while following bankruptcy. If you do by chance get an offer, the interest rate will be high enough to put you back in bankruptcy. To rebuild credit, sometimes you have to suffer the downsides of a secured card for a brief time.

Unhappily these cards have a high upfront fee such as $200. But the benefit they yield is rebuilding credit quickly. After this, consider enrolling into a credit repair program which will help get your score back up faster than alone.

When your credit score reaches around 700, the mainstream offers will start rolling in. Your goal must be moving from a secured card to a standard, unsecured credit card. By this point, you will have rebuilt using a secured credit card, so this new unsecured line of credit should have a significantly better interest rate.

After achieving the unsecured card, keep your consumption low. Make your payments on time every month. If you can’t follow these few rules for having unsecured debt, it’s best to avoid it altogether. One bankruptcy on your report is bad enough, and remember, you generally can’t file again for another 8 years.

Advantages and Disadvantages of Bankruptcy

Declaring bankruptcy can aid in relieving you of your legal responsibility to pay your debts. It also can help secure your home, car, business or skill to function monetarily, liable on what kind of Bankruptcy petition you file.

But, as we learned, it is a major detriment to your credit rating, making it more problematic to get a mortgage, loan or low-rate credit card, or buy a car, home, apartment or business.

If bankruptcy is your only option, be sure to use the methods discussed to rebuild your credit. Getting out of debt is one thing, staying out of debt is another.

The post How long does it take to recover from Bankruptcy? appeared first on Consumer Debt News.

Bankruptcy is a legal status. This status has been imposed after a court order if a business or individual fails to repay it’s debts. Indeed, this sounds like something really bad if you are living in America as it affects your reputation and damages your credit rating. Once you’ve filed, applying for and receiving additional credit becomes very difficult. Here’s some additional information about bankruptcy and its various types.

In America, once bankruptcy is declared, this status remains on your credit report for 10 years. This doesn’t mean you won’t qualify for new credit a couple years afterwards, but there will be a significant cooling down period before you’re considered again. And, we probably don’t need to mention this, but it’s also not good for your credit score. With that said, in some cases bankruptcy could be a good option for a consumer.

When bankruptcy does make sense for a consumer?

Bankruptcy is not the end the world and it can be recovered from. Declaring bankruptcy absolves you from any type of unsecured debts, prevents foreclosures, and stops other debt collection activities. Although this could be expensive as you have to pay the lawyer fees, sometimes it’s worth the cost to “reset” your credit.

The time to declare depends on many factors. Some of these could be your mortgage, your current credit score, the danger of foreclosure or even being harassed by bill collectors. If you want to get rid of all of these things, and have explored all possible debt relief options, bankruptcy may be the best bet for you. This will not only eliminate your debts, but also help you to save your home and silence the collectors who may be harassing you. But, it may also be creating long term damage to your credit score.

How does bankruptcy affect my credit?

It has been believed that bankruptcy can actually give rise to your credit score, which is generally true, but in the short term only. Usually, the credit score is already battered at the time of declaring. Following a successful bankruptcy, all the debt has been removed which gives an artificial rise in the credit score. In the real world, the credit score has been declining for many years as a result of borrowing additional loans, obtaining credit, credit cards, and even other financial activities.

What other options are available?

For a person who does not have enough money to pay the debt, they should first consider a reputable debt settlement program. When we compare debt settlement vs. bankruptcy, debt settlement could be a great option. It is a settlement in which third-party companies pay the debt to your creditors on your behalf. It’s usually a significantly lower amount than you owed, and negotiated by the company who pay on your behalf. In addition, a debt settlement company can eliminate interest rates, drastically reducing your total cost and time to repay.

If you choose debt settlement over bankruptcy, you could be saving yourself from up to 10 years of negative credit history and difficulty obtaining credit. It does not only lower the amount of debt, but also helps you to avoid bankruptcy. The fees for debt settlement are usually far less than bankruptcy, and the damage to your credit that may incur from a settlement program usually recovers quickly.

In closing – Bankruptcy or Debt Relief?

Both have their merits, and their downsides. Bankruptcy often seems like a quick and easy way out from under your debt, but remember not everyone qualifies and the long-term damage may not be worth it. Debt settlement will also affect your credit, but quite temporarily, as the settlement company you choose pays off your debts, your debt to income ratio and payment accounts improve, reviving your credit score. Do your due diligence in researching your options before making any decision that can have a long-term impact on your credit.

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