Having debt hanging over your head is not good feeling. But having part of your paycheck garnished because of default is an even worse feeling. Besides a poor credit score, a garnishment carries an additional stigma. The debt collector must notify your employer about the wage garnishment. Ideally, actions to stop the garnishment should occur well before it reaches that point. A debt collector can garnish the lesser of 25 percent of your disposable earnings or the amount by which your disposable earnings are greater than 30 times the federal minimum wage of $7.25 per hour.
Assess your financial situation. This requires that you take account of all of your household income and expenses. Pull together any supporting documentation to substantiate your claim of hardship. Examples of supporting documentation include rent receipts, bank statements, pay stubs, medical bills, proof of job loss and tax filings.
Create a worksheet showing your sources of income minus all expenses to calculate your disposable income. This is the amount of money you have left after meeting your basic needs. A high disposable income gives a debt collector just cause to seek a wage garnishment. From a debt collector's perspective, if you're spending $100 on entertainment every month, that's $100 you can put toward your debt obligation. Remember, you have to show financial hardship.
Find out the name of the person at the debt collection agency handling your case. Addressing a letter to a person rather than using a generic salutation such as "To Whom It May Concern" adds a personal touch. Convey in your letter that you have low or no disposable income by producing specific details about your financial hardship and what caused you to default. For example, a sentence such as "Since my job began cutting hours, I can no longer afford to pay my share of the rent of $700 per month" is better than simply stating you have no money.
Include with your letter all the supporting documentation you gathered, such as your household income, expenses and other pertinent information. For example, if your employer is cutting back hours, include this information. Obtain a letter from your boss attesting to this fact to bolster your claim of hardship. If you're the only person working in your household or are responsible for a dependent, include this fact in your letter. Having tax filings showing your head of household status and the dependent's name and Social Security number count as supporting documentation.
Include in your letter what steps you plan to take to address the default, such as making a reasonable effort at a payment plan. Mention any circumstances that have changed recently to make your ability to pay off the debt more likely. This conveys to the creditor your goodwill toward satisfying the debt.
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