If you didn't catch yesterday's post, you may want to start here – How to avoid wage garnishments
The Crippling Effect of Wage Garnishment
The same New York Times article I cited yesterday discusses the case of Sidney Jones, a maintenance worker from California Crossroads, Virginia, who took out a personal loan in the amount of $4,097 in January of 2001.
When Mr. Jones stopped making payments on the loan, the creditor, Beneficial Virginia, sued and was awarded a judgment of $5,650. Nine-hundred dollars of that judgment was added on as “lawyers’ fees,” and the debt would accrue interest at a rate of 27.55%. Had Mr. Jones shown up in court, he more than likely would’ve been able to negotiate a better debt settlement offer.
Starting in the spring of 2003, Beneficial Virginia garnished Mr. Jones’ paycheck for a total of more than $10,000 over a six year period. The amount he still owed the company in Spring 2009: $3,965.
Mr. Jones’ response, “Where did all this money go that I paid them?”
Once you’ve been saddled with wage garnishment, expect the fees to be astronomical. This is why it’s imperative that you steer clear of it at all costs.
Wage Garnishment Can Be Avoided
Losing 25% of your income can throw your financial life into a tailspin. There are steps to avoid having your debts ending up in front of a judge in the first place.
List Your Creditors – The first thing you should do if you know you’re in debt and creditors are hounding your for that money is make a list of anyone that you may owe money to. You want to make sure that the debt actually belongs to the person that you’re looking to pay off. Very often debts are sold and re-sold to various collection agencies.
Contact Your Creditors – Outside of not actually paying off your debt, this is the major contributing factor to outstanding debts ending up in court. Usually consumers are scared or confused and never bother to make contact. If that’s the case, make an attempt to use a debt settlement company as an intermediary. They’re often very effective and can save you a good amount of money.
Bankruptcy – This should be a last resort. It’s possible that bankruptcy can get rid of the debt, but if a judgment has already been rendered against you, it’s possible that the debt’s there to stay. Bankruptcy creates a whole set of new financial problems for you. It’s best to try and settle your debt with the creditors before you reach this point.
Get Involved With Your Finances – Many Americans like to turn a blind eye to their past financial mistakes, hoping that if they do it long enough, maybe it’ll all just go away. It’s not going to. You need to involve yourself with your creditors and collection agencies to keep debts from going to court in the first place. If you’re unsure of how to start, look up credit repair or debt relief specialists to advise you. But you need to make yourself available and meet your financial problems head-on.
Learn from Your Mistakes
If you’re on the verge of wage garnishment or have judgments filed against you, then you obviously know about the pitfalls of credit and debt. While creditor’s collection tactics can often seem severe, it’s realistically your own debt that got you into this financial trouble.
Analyze what went wrong financially and asses if there was anything that could’ve been done differently. Are you budgeting? How about saving? If you’re even able to get credit, are you using it responsibly? These are all very important questions to ask yourself. Otherwise you may be in debt for the rest of your life, and that’s no way to live.
You need to avoid wage garnishment at all costs. With more and more consumers being overwhelmed with debt, collection agencies are pulling out all the stops to get their money back. Wage garnishment is on their terms. Do yourself a favor and figure out a way to pay them on terms that are more suitable to you. And remember; ignoring the problem won’t make it go away.
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