Wage seizure laws may affect those with debt problems

As consumers try to get out of debt in a rough economy, turning to bankruptcy may be an option for them to explore.

Credit card and debt collection companies also are feeling the pinch and have turned to wage seizures as an option to get their money back.

However, according to a report from the Associated Press, turning to wage seizure options in states that allow them could actually work against credit card and debt collection companies.

“By going after wages – an increasingly popular maneuver since the recession began, lawyers say – they risk pushing consumers into bankruptcy court, where judges can reduce or wipe away all sorts of financial obligations,” the AP stated.

The report compared five states that limit or prohibit wage seizures to neighboring states and showed the five states had far lower bankruptcy rates. For example, Pennsylvania’s bankruptcy rate was half that of Ohio’s.

Using data gathered from the National Bankruptcy Research Center, the American Bankruptcy Institute stated that 675,351 consumer bankruptcy filings have been made in the U.S. during the first six months of this year. The number of filings is up 36.5 percent compared to the same period of time last year.