Editor's note: This column is a continuation of the column that ran Feb. 2, "Young mother with old debt fears collectors."
Dear Debt Adviser, Your article, "Old debts won't hurt new loan," had a lot of valuable information I forwarded to my daughter. Twelve years ago, she was one of those 18-year-olds who was offered numerous credit cards, even though she was only a student. Her story is the familiar one of too much credit and no way to pay it all back. In regard to your article, we had a couple of questions and would very much appreciate your answer.
- She has at least one account that was delinquent and closed more than 10 years ago. She has started getting calls from a collection agency asking for payment. Your article indicated these debts should no longer be on the credit report. However, are collection agencies still allowed to pursue payment?
- She is a single mother of two boys who makes $12 an hour and gets $200 per month total for child support. After rent, utilities and food, she doesn't have the money to pay on this old debt. Can her wages be garnished?
Thank you very much for your help and information.-- Marlene and Melissa
Dear Marlene and Melissa, In my last column, "Young mother with old debt fears collectors," I answered your first question and said old debts can be pursued, but the statute of limitations may limit a collector's options. Here is the answer to your second question concerning wage garnishment:
Although a collector may ask for payment on a very old debt, they may not be able to do much more. Without the ability to report damaging information to your credit report if the debt is more than seven years old and without the ability to sue you in court if the debt is past the statute of limitations in your state, most collectors are reduced to using either bluster or guilt to get a payment from you.
Before someone's wages can be garnished, the collector has to go before a judge and get a court-ordered judgment that the money is owed and the debt is valid. If the debt is not past the statue of limitations, a collector may decide to sue in court and could be granted a judgment for the amount owed.
If you live in a state that allows wage garnishment, your daughter's wages could be garnished using the court judgment at a maximum rate of 25% of disposable earnings (after federal and state taxes and retirement contributions) or the amount of disposable earnings greater than 30 times the federal minimum wage (currently $7.25), whichever is less. So if your daughter earns $408 net each week, her wages could be garnished by $102, leaving her with $306 per week. Her child support payments would not be eligible for garnishment.
However, if a collector knowingly takes an unenforceable case to court, they are breaking the law and are open to being sued for damages. Still, some may try, so I suggest that she pay attention to her mail for any correspondence from collectors and/or creditors and be sure to open and read them. Do not throw them away or ignore them.
Should she receive notification of a court date or request from the court to send documentation concerning a suit, she should appear or be sure to send in the requested information to the court. It's always a good idea to have an attorney with you if you have to appear in court. Check with your local legal aid office for free or low-cost advice or have her look for an attorney who will represent her for a percentage of the suit she will file if they try to get a judgment on a debt they know is past the statute of limitations.