With the economy still creeping along on its belly, many Americans are facing mounting piles of debt. And for an increasing number of people — whether through mismanagement of their finances, loss of income or change in employment status — creditors are moving to garnish their wages to recoup their money.

Before a creditor, including the government, can begin taking their pound of flesh straight from your paycheck every week, they almost always need to file a lawsuit. But many people never appear in court to defend themselves because they assume they’re going to lose and the worst that can happen is they still owe the money.

However, this often only makes the situation much worse as the creditors will not only begin to garnish your pay — up to 25% of your take-home income — but will tack on near-usurious interest rates and penalties.

And before you think “I’ll just declare bankruptcy,” you need to know that it often costs thousands of dollars to officially be declared broke.

Says the NY Times, it’s always in your best interest to face your creditors in court:

In the rare event that a consumer battles back, creditors frequently lack the documentation to prove their claim, and cases are dropped. That is because many past-due debts are owned not by the banks that issued them, but by debt collectors who bought, for cents on the dollar, a list of names and amounts due.

So if you find yourself penned into a corner and your creditors are unwilling to work out a reasonable payment schedule, try to find a reasonably priced attorney (the money you spend on the lawyer will likely be less than the penalties incurred by losing a lawsuit) and get your day in court.

Pay Garnishments Rise as Debtors Fall Behind [NY TImes]

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