When a borrower is unable to make a credit card payment, it is possible that the issuer could seek a wage garnishment or seek a lien on certain property. However, creditors cannot do so on their own. Instead, a creditor must first obtain a judgment and then seek a court order asking permission to garnish wages or place a lien on property. If a garnishment is granted, the law states that a maximum of 25 percent of wages can be garnished each pay period.
A debtor may protest the ruling if he or she believes that it is not possible to live on only 75 percent of each paycheck. However, the are some exceptions to this rule. For instance, the IRS can garnish wages and place liens on property without a court order. Those who have not made student loan payments could see up to 15 percent of their wages garnished by the Department of Education.
In addition, another 10 percent could be garnished by a state education agency. Those who are behind on child support payments may have up to 50 percent of their wages garnished to comply with a court order. Typically, a tax refund will not be taken unless there is a specific request from the IRS, DOE or a child support agency requesting that money.
Those who are burdened with insurmountable financial obligations may wish to pursue bankruptcy. In a Chapter 7 bankruptcy case, some unsecured debt may be discharged in a matter of weeks or months. However, certain types of debts are not dischargeable, and a bankruptcy attorney can discuss this information as well as the eligibility requirements with a client.
Source: Findlaw, "I am unable to pay off debt to a creditor. Can he or she place liens on my property, garnish my wages, seize my assets, or take my tax refund? ", December 17, 2014