Many people who are suffering from overwhelming debt still want to make good on their payments. Unfortunately, some unforeseen circumstances such as unemployment or a medical emergency can make it impossible to stay current on bills. It can help when creditors are understanding and work with their customers, but a disturbing trend that’s happening to millions of consumers in Oregon and throughout the country shows that this is not always the case.
A study conducted by National Public Radio and ProPublica revealed that about one-tenth of all Americans between the ages of 35 and 44 are having their wages garnished for credit card debt, student loans or medical debt. Traditionally, most people had their wages garnished for unpaid child support; however, more people today are having a portion of their wages taken to repay other debt. More than half of states, including Oregon, make it legal for lenders to take a quarter of consumers’ net wages.
Unsurprisingly, this can create a snowball effect that makes a person’s financial situation even worse. In one example, a Missouri man found that his credit card company was taking a fourth of his wages from a $7,000 credit card debt that he had been trying to pay, but had lately been unable to meet the minimum payment. The company did not lower his interest rate even after garnishment, and interest and fees inflated his balance to over $15,000.
Consumer protection agencies are discussing ways to protect people from garnishment abuse, including taking too much out of a person’s paycheck and charging exorbitant interest rates. While many people hope to be able to repay their debt, bankruptcy can be an option for those who are facing wage garnishment.
Source: NPR, “Millions Of Americans’ Wages Seized Over Credit Card And Medical Debt,” Chris Arnold and Paul Kiel, Sept. 15, 2014