Can Loans Garnish Wages? A Comprehensive Guide

Wage garnishment is a process that can be used to force loan holders to pay overdue student loan balances. When a loan holder fails to make payments for nine months, the government can garnish their wages. Private lenders must meet more requirements before they can garnish wages, such as filing a lawsuit and obtaining a money judgment and court order. Federal student loans get special status, as the government does not need to get a court ruling before attempting to garnish wages.

If wages cannot be garnished, the Department of Justice could sue the loan holder to collect unpaid loans. In order to get money out of a bank account to pay off private student loans, banks and other lenders must sue the loan holder and get a judgment first. A payment plan won't get you out of default, but you can keep your paycheck safe from garnishment if you move quickly. You have 30 days from the date you receive the notice of intent to garnish to establish a payment plan and make the first payment. Before wages can be garnished, the Department of Education must send a garnishment notice to the last address on file for the loan holder.

Child support, consumer debts and student loans are common sources of wage garnishment. If you don't pay your federal student loans, your profits will be garnished until the debt is paid or otherwise resolved. You can avoid default by requesting a deferment or temporary suspension of collection, switching to an income-based repayment plan, applying for a consolidation loan, or refinancing with a private lender. Loan rehabilitation is a unique program that stops garnishing wages and offsetting tax refunds and Social Security payments. To avoid wage garnishment, consider borrowing from friends or family, or possibly applying for a personal loan. For most types of debts, such as credit cards and medical bills, the creditor cannot garnish your wages right away if you stop paying your bill. The holder of federal student loans can garnish wages without filing a lawsuit or obtaining a judgment against you.

To do this, they must file a lawsuit with the court and get a judgment before their wages can be garnished. Another option federal student loan borrowers have to stop a garnishment is to ask for it to be removed due to extreme financial hardship. Under the Debt Collection Improvement Act, an administrative wage garnishment can be used to withhold the lower 15% of disposable income or an amount that exceeds thirty times the minimum wage in your state.

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