Last updated Dec. 29, 2017.
Say you’ve made some purchases on your credit card, and you owe a couple thousand dollars. Then something unexpected happens (maybe your roof starts leaking or your car needs new tires) and you find yourself a bit short one month. You plan to pay in full the next month, but the payment is too high with the interest and fees. You know that you have to make the minimum payment every month, but it’s hard to catch up once you get behind. With interest and fees accruing, the day may come when you can’t make the minimum payment.
When will my account go to collections?
When you miss a minimum payment, the credit card company will contact you about your default. They may send letters or call. They’ll try to work out a payment plan with you — they’d rather do that than deal with the hassle of collections. If you can’t come to an agreement about a payment plan or if you do start a plan but miss one or more payments, the credit card company will turn your debt over to a collections agency or a debt buyer. This whole process generally takes three to six months from your first missed payment.
See also: Debt Collection Laws in Ohio
What happens when my account has gone to collections?
First, expect the debt collectors to start contacting you immediately, and probably every day. They generally get paid based on what they collect, so they’re motivated. They’ll try to convince you to pay. If you can’t or won’t, they’ll sue. They’ll get a court judgment for the debt and then they’ll get a court order allowing them to garnish your bank accounts and wages or seize your property as payment.
Collection Lawsuits in Ohio
When you’re sued for debt collection, you’ll receive notice of the lawsuit. In Ohio, you have 28 days to respond to the suit. You have two options:
If you believe that you don’t owe the money or that you owe less than you’re being sued for, you can file an answer explaining your position. You’ll send the answer in to the court and it will set a date for a hearing. At the hearing, you’ll go in person to explain to the judge why you either don’t owe the money or owe a different amount. You should bring all of the paperwork relating to the debt with you, including any communication between you and your creditor or the collection agency. After the judge has heard both sides of the story, she’ll enter a judgment either for you or for the creditor. The judge may decide that you don’t owe the debt (because it was an error in the first place or because you already paid it) or that you do owe a particular amount. You may be able to appeal, but the appeals process is long and expensive and you’re not guaranteed a different outcome.
If you don’t want to dispute the debt, you don’t have to file an answer. The court will find in favor of the creditor. This is called a “default judgment.” If default judgment is entered against you, you can’t appeal.
What does it mean if a collector has a judgment against me?
Whether you file an answer or not, the judgment is permanent. It means that the creditor has a concrete legal right to payment from you in the amount of the judgment. If you don’t pay up, your judgment creditor can ask the court for permission to take payment from you in several ways. They can levy your bank accounts or place a lien on your home. They can also garnish your wages.
When a creditor gets a levy against your bank account, your bank will freeze the account and release the funds in it to the court. You’ll receive notice of the levy. The notice will inform you of your right to a hearing to fight the levy; you’ll have to request that hearing by the deadline on the notice or the court will release the funds to your creditors. Creditors can claim anything in your accounts, but must leave you with at least $450. Ohio law protects, or “exempts,” that amount from seizure by creditors.
The Demand Letter and Wage Garnishment
When a creditor gets a court order against you for collection, it must send you a letter between 15 and 45 days after the judgment informing you of the judgment and listing your options: pay the debt or expect wage garnishment. That’s called a “demand letter.” You may be able to make a payment to the creditor and put the whole issue to rest. You may not, in which case your creditor will likely attempt to garnish your wages.
When a creditor garnishes your wages, your employer will receive a court order stating that a certain amount of your wages must be withheld and paid to the creditor. Your employer doesn’t have a choice in the matter — they’re on the legal hook if they don’t comply. You can avoid formal garnishment by agreeing to voluntarily pay the amount that would have been garnished. You’re still out that much cash but the garnishment won’t show up on your credit report, saving you a few points on your credit score. If you fail to make the voluntary payments, your creditor will simply initiate formal garnishment.
Avoiding Wage Garnishment: Debt Repayment and Credit Counseling
When you receive the demand letter, you can pay up or expect garnishment. However, you also have two other options: you can apply for a city or county trustee to manage your debt repayment or you can retain a credit counseling service. If you apply for a trustee, you’ll make voluntary payments of the amount that would have been garnished to the trustee. The trustee will then distribute that amount among your creditors until your debts are repaid. If you use a credit counseling service, the service will negotiate a payment plan with your creditors. Once they agree to the plan, they can’t garnish your wages.
In either case, if you miss a payment, you’ll be stuck with wage garnishment again. If you can keep up with voluntary payments, however, either of these is a better option than wage garnishment, which has a serious effect on your credit score.
How to Stop Wage Garnishment in Ohio
When you receive notice of wage garnishment, you have one last chance to dispute it. Under Ohio law, some sources of income are completely exempt from wage garnishment. These include Social Security retirement or disability benefits, unemployment benefits, and worker’s compensation. In general, most government-provided benefits are exempt. If some or all of your income comes from exempt sources, you can dispute the wage garnishment notice and request a hearing. The notice will include the information and forms you need to dispute the garnishment. Make sure to respond within the time listed on the notice or you will lose your chance to dispute the garnishment.
At the hearing, you’ll have a chance to show the court that your income is exempt. You’ll need to provide proof that you do, in fact, have income in the reported amount from an exempt source (documentation of your Social Security benefits, for example). If all of your income is exempt, you’re completely protected from wage garnishment. At the very least, your exempt income is safe.
Objecting to Garnishment
Wage garnishment is a difficult situation, but the law still protects your rights. You may need to object to wage garnishment if your creditors are acting inappropriately. If the creditor is taking too much money from your check, you should object to the garnishment in writing to the court. You should also object if you’ve already paid the debt in full but the garnishment has continued. Finally, you should object if the creditor did not follow proper procedure. For example, a creditor that failed to send you a demand letter has no right to garnish your wages and the court will ensure that the garnishment stops.
What can a debt collector in Ohio take?
It can be frightening to deal with the aggressive tactics of debt collectors even before they have a legal judgment against you. Once judgment is issued, it can be even worse. You legally owe the debt and they legally have the right to collect, even if it means taking the car out of your driveway and the cash out of your checking account. If you have non-exempt income, they can take that, too. Thankfully, while the law gives them the means to collect what you owe, it also protects some of your assets.
In Ohio, a debt collector may only garnish up to 25% of your non-exempt wages and must leave at least $425 in your bank account. They also may not seize a vehicle worth less than $3,225. Better yet, the law protects $125,000 in home equity from creditors and $10,775 in aggregate value of household goods. The law also protects an additional $1,225 in equity if other exemptions aren’t enough to cover you (please note that these values change based on inflation every three years). Ohio R.C. § 2329.66. Finally, your government benefits are exempt. Creditors can’t seize any part of your Social Security, workers’ compensation, spousal or child support, pensions, veterans benefits, or any other state or federal program benefits.
Compared to the protections offered in the rest of the nation, Ohio falls somewhere in the middle. An individual earning minimum wage will be left with only $235 weekly if collectors garnish 25% of his wages — that’s about $65 under the federal poverty level for a couple and only half the federal poverty level for a family of four. Ohio offers better-than-average protection of home equity and household goods, but leaving only $425 in a debtor’s bank account and seizing any vehicles worth more than $3,450 leaves debtors with very little if they don’t own a home. Many consumer advocates suggest that the law doesn’t do enough to protect debtors in Ohio.
Bankruptcy May be a Solution
If you’re facing collections and you’re out of options, consider filing for bankruptcy. When you file for bankruptcy, you invoke the protection of the automatic stay. The automatic stay will stop all collection actions and foreclosure processes against you for the duration of the bankruptcy. It can give you the room you need to get your finances back on track. You will likely be able to keep most, if not all, of your important assets and at the end of the bankruptcy process, your remaining unsecured debt will be discharged. That means it’s forgiven and you won’t have to face the threat of debt collectors again.
If you’re struggling with debt and debt collectors, speak with an experienced bankruptcy attorney. He or she can help protect your rights from debt collectors and can work with you to determine the best options for your financial future. Contact us today — we’ll be happy to help you!