Debt collectors, garnishment and your rights

The federal debt collection law covers third parties collecting personal, family or household debts: collection agencies and debt buyers working someone else's debt. A business collecting its own bills under its own name is generally outside it, and business debts are outside it entirely. State law still applies, and some states add their own rules.

This lesson is general education, not legal advice. For your own case, call legal aid; the links are below.

Within five days of first contacting you, a collector generally has to send a validation notice. It names the creditor, gives the account number, itemizes the amount, and sets an end date for a 30-day window to dispute. Dispute it in writing inside that window, or ask in writing for the original creditor's name and address, and the collector has to pause collecting until it responds.

To stop the calls, send a letter asking the collector to stop contacting you. After that, it can only contact you to confirm it will stop or to tell you about a specific action, like filing a lawsuit. The calls stop; the debt doesn't go away. If a collector breaks the law, you have one year to sue.

Most states give creditors three to six years to sue on a debt, and some give longer. Once that time passes, a collector can't sue you or threaten to. In most states it can still ask you to pay, as long as it follows the law. In some states, a partial payment, or saying you owe it, can restart the clock even after time ran out. That time limit is separate from your credit report, where most negative information can stay seven years.

If you're sued on an old debt anyway, you have to respond and point out that time ran out. The court won't raise it for you.

Most garnishments come from a court order. For a card or medical bill, that usually means the creditor sued and won. Tax debts and some debts owed to the federal government can be collected without a lawsuit.

For ordinary debts, federal law caps garnishment at the smaller of two numbers: 25% of your disposable earnings for the week, or the amount your weekly disposable earnings top 30 times the federal minimum wage. At $7.25 an hour, that's $217.50 a week, so if your disposable earnings are $217.50 or less, nothing can be taken. Disposable earnings are what's left after legally required deductions like taxes. Child support and alimony, bankruptcy court orders, and tax debts follow different limits. If your state allows less, the smaller amount applies, and federal law bars your employer from firing you over garnishment for any one debt.

Example: A court lets a card company garnish Marcus's pay. In a July week his disposable earnings are $800: 25% is $200, and the amount over $217.50 is $582.50, so up to $200 can be taken. In a short December week of $260, 25% is $65 but only $42.50 is over $217.50, so the most is $42.50. Made-up numbers.

If you're sued, respond by the date in the court papers, yourself or through a lawyer. If you don't, the court can enter a default judgment against you. Depending on state law, the creditor can then garnish your wages, freeze your bank account or put a lien on property. Even if you think the debt isn't yours, or that it's too old, you still have to respond and say so. Legal aid offices may help for free if you qualify.

• Legal Services Corporation: Find legal aid near you
• Consumer Financial Protection Bureau (CFPB): Submit a complaint about a debt collector
• CFPB: What a debt collector has to give you about a debt
• CFPB: Sample letters to send a debt collector
• U.S. Department of Labor: Wage garnishment limits