Millions Subject To Wage Seizure For Consumer Debt

Back in 2009, Kevin Evans was one of millions of Americans blindsided by the recession. His 25-year career selling office furniture collapsed. He shed the nice home he could no longer afford, but not a $7,000 credit card debt.

After years of spotty employment, Evans, 58, thought he'd finally recovered last year when he found a better-paying, full-time customer service job in Springfield, Mo. But early this year, he opened his paycheck and found a quarter of it missing. His credit card lender, Capital One, had garnished his wages. Twice a month, whether he could afford it or not, 25 percent of his pay — the legal limit — would go to his debt, which had ballooned with interest and fees to over $15,000.

The recession and its aftermath have fueled an explosion of cases like Evans'. Creditors and collectors have pursued struggling cardholders and other debtors in court, securing judgments that allow them to seize a chunk of even meager earnings. The financial blow can be devastating — more than half of U.S. states allow creditors to take a quarter of after-tax wages.

At the request of ProPublica, ADP, the nation's largest payroll services provider, undertook a study of 2013 payroll records for 13 million employees. ADP's report, released today, shows that more than one in 10 employees in the prime working ages of 35 to 44 had their wages garnished in 2013.
Roughly half of these debtors, unsurprisingly, owed child support. But a sizeable number had their earnings docked for consumer debts, such as credit cards, medical bills and student loans.
Extended to the entire population of U.S. employees, ADP's findings indicate that 4 million workers — about 3 percent of all employees — had wages taken for a consumer debt in 2013.

 ADP's study, the first large-scale look at how many employees are having their wages garnished and why, reveals what has been a hidden burden for working-class families. Wage seizures were most common among middle-aged, blue-collar workers and lower-income employees. Nearly 5 percent of those earning between $25,000 and $40,000 per year had a portion of their wages diverted to pay down consumer debts in 2013, ADP found.

 Even if a Debt is Years Old, a Debtor Can Be Hit With a Garnishment

When a creditor or debt collector files a lawsuit and wins a court judgment against a debtor, their power to garnish the debtor's wages or bank account lasts as long as the debt is outstanding — even a decade later. This chart shows the age of the original lawsuit for garnishments filed in Missouri in 2013.

 




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