- Contact the Dept. of Education to prevent wage garnishment.
- Consider filing a Chapter 13, which results in a court supervised repayment plan.
State and Federal Laws May Help You Stop a Student Loan Wage Garnishment.
The options available to stop or reduce a student loan-related wage garnishment depend on whether the delinquent student loans are federally insured loans, such as Perkins, Stafford, PLUS loans, or private student loans.
Federal Student Loan Garnishment
Federal law allows the Department of Education to garnish 15% of a delinquent borrower’s after tax income for federally insured student loans (34 C.F.R. Part 34-Administrative Wage Garnishment). It may do so as long as the garnishment does not bring the borrower’s weekly pay below 30 times the Federal minimum wage. As I write these words, this means a borrower is guaranteed $217.50 ($7.25/hour × 30 hours) per week exempt from garnishment. (These numbers are current as of early 2013.) If you make less than that amount each week, then your wages are exempt from garnishment altogether. Unlike other creditors, the federal government has the right to garnish wages, levy bank accounts, and seize property without first obtaining a court judgment against the debtor (31 USC Chapter 37, Subchapter II). Federal agencies may intercept your tax refund, which is called “offset” (26 U.S.C. § 6402(d) and 31 U.S.C. § 3720A). You also can have your income tax refund taken to pay down your student loan debt.
If you can prove to the Dept. of Education that its garnishment of your wages is causing your family an undue financial hardship, it may be willing to stop the garnishment and work with you in establishing alternate repayment terms. For example, facing foreclosure of your home as a result of garnishment should qualify as an undue hardship.
To try to stop an administrative garnishment, contact the Department of Education’s resource Facing Loan Default. The DOE provides a list of resources available for consumers who have defaulted on their loans. Another good resource to explore is the Student Loan Borrower Assistance Project’s (SLBAP) Administrative Wage Garnishments.
If your federal student loan payments are causing financial distress, review the Income-Based Repayment (IBR) program, and see the Dept. of Education’s IBR calculator. If you do not qualify for IBR, learn if Income Contingent Repayment is right for you.
If you defaulted on your federal loans and want to restart payments, see the Dept. of Education’s Loan Rehabilitation page.
Private Student Loan Garnishment
Private student loans, on the other hand, are basically the same as any other unsecured personal loan; the only major difference between private student loans and regular personal loans is that the former are generally non-dischargeable in bankruptcy.
Private lenders must file a lawsuit against the borrower and obtain a judgment before they can garnish wages, so it takes private lenders longer to begin a garnishment.
Depending on where the borrower lives, private lenders with a judgment may garnish as much as 25% of the borrower’s after-tax wages (15 U.S.C. 1673). However, the amount that can be garnished is specific to each state. See the Bills.com resource Collection Laws & Exemptions by State to determine how much of your pay can be garnished by private lenders. Texas and Pennsylvania, for example, do not allow wage garnishment for unsecured debts such as private student loans.
Keep in mind that no matter where you live, if your loans are federally insured, you can usually be garnished 15% of your disposable wages, regardless of your state laws regarding garnishment for other types of debts.
To try to stop a garnishment resulting from a private loan, you should contact the creditor to discuss your financial situation and try to negotiate an alternate payment plan. Unfortunately, the creditor may not be willing to stop the garnishment voluntarily, forcing you to explore alternative options.
Bankruptcy and Student Loans
The last option most people consider to prevent garnishment for student loans is filing for bankruptcy protection. Since student loans generally cannot be discharged in a Chapter 7 filing, you would probably need to file a Chapter 13 bankruptcy, which is a court supervised repayment plan in which your student loans, as well as other debts, would be repaid through monthly payments made to the court.
Chapter 13 can be an expensive and long-term commitment (5 years, typically), but if you feel it may be an option to stop your wage garnishment, consult with a bankruptcy attorney in your area to learn if bankruptcy will help improve your financial outlook. Surprisingly, some find their monthly payments under a chapter 13 are more than the amount they would have been garnished had they done nothing, so if you are considering bankruptcy, please make sure to discuss it in detail with an attorney to determine if it is the right choice for you.
Filing a chapter 13 bankruptcy may bring your mortgage current, stop a foreclosure, and allow you to pay now-delinquent payments over the course of your bankruptcy plan. To learn more about your bankruptcy options, visit the Bills.com bankruptcy information & resources page.
May 03, 2013
May 06, 2013
You mentioned your spouse's liability for your student loan debt. You also mentioned you reside in the Philippines. I have no experience with Philippine law, so I cannot comment whether your spouse has any liability for your student loan or other debts.
Consult with a Philippine lawyer who has experience with consumer law or civil litigation to learn if your medical condition qualifies you for a discharge of your student loan debt in bankruptcy. Your lawyer will also answer your questions about your spouse's liability for your debts. Finally, he or she will advise you if renouncing US citizenship will make it more difficult for the Dept. of Education to offset your Social Security benefit.
Galveston, TX | May 02, 2013
May 02, 2013
- Federal: Congress gave the Dept. of Education the ability to, on its own authority, order your employer to garnish up to 15% of your disposable earnings. There is no statute of limitations on a federal student loan, for all intents and purposes.
- Private: The law treats private student loans as the same as any other unsecured debt, such as delinquent credit card or medical debt. Before a private student lender can garnish your wages, it must file a lawsuit against you, win, and then ask the court to give it a judgment. The judgment allows the private student lender to garnish your wages, levy your bank accounts, and place liens on property titled in your name. Because private student loans are treated like any other unsecured loan by state courts, your loan is subject to your state's statute of limitations rules.
I discussed these two points because you mentioned your loan was from 1986. It's unclear when you last made a payment on this loan. Assuming the loan is private, your first action should be to consult with a lawyer in your state who has civil litigation experience. Ask him or her if the lender followed your state's civil procedure rules when it filed the lawsuit against you, and when it started the wage garnishment. Most state courts follow wage garnishment rules narrowly, and if the lender took any short-cuts along the way the court may order the garnishment stopped.
Assuming the Dept. of Education or the private lender followed the letter of the law, the garnishment will continue until the debt is paid in full. That means the garnishment order covers the entire debt, and not just the interest portion of the debt.
A settlement for less than the entire amount due is possible in theory. However, in your situation here, what incentive does the lender have to agree to a lump-sum settlement for less than the full balance due when its successful garnishment will result in 100% repayment, plus fees and interest? The only situation I can imagine where a lender might agree to such a settlement is where the borrower has a low income, and the amount garnished each pay period is low. This would result in a long time to repayment. Let's say the borrower then receives a windfall. The borrower could open a negotiation and say something like, "At the rate we are going here with this garnishment, I will not pay the amount due in 5 years (or whatever). Let us settle this once and for all for 40 cents on the dollar today."
Phoenix, AZ | April 19, 2013
April 19, 2013
For federal loans, the Dept. of Education is permitted to use administrative wage garnishment to require your employer to withhold up to 15% of your disposable income. If your loans are federal, your employer should withhold a maximum of 15% of your disposable wages from your paycheck, and not 30% as you described.
For private student loans, the creditors or their collection agents must follow your state's wage garnishment rules. The creditor/collection agent must file a lawsuit against you, win, and then obtain a judgment from the court. With the judgment in hand, it may then ask the court to garnish your wages. The maximum amount that may be garnished under federal law is 25% of your disposable income. Some states have lower limits. Here, if your student loans are private, the court is violating federal law by allowing more than 25% of your disposable income to be garnished.
If you have a mixture of private and federal loans, the Dept. of Education can garnish 15% of your wages, which allows the private lender to grab 10%. The only instance where the 25% limit can be exceeded is for cases of delinquent child support. See the Bills.com wage garnishment article to learn more.
Collection agents have one job — collect money. Do not believe the legal advice from collection agents because it may be incorrect, misleading, incomplete, or presented in a manner that does not serve your best interests. Which brings me back to my original point — see a lawyer now. If you cannot afford one, call your county bar association and ask for the names of the organizations that provide no-cost legal services to people in your area with no and low income. Make an appointment with one of these organizations, and bring all of the documents you have regarding the student loans and garnishment to your meeting. The lawyer you meet will help you straighten out this mess.
March 01, 2013
March 01, 2013
Brecksville, OH | January 09, 2013
January 09, 2013
Ohio allows wage garnishments for private student loans. You can have 25% of your disposable income garnished in Ohio, as well as suffer a bank levy, if your creditors obtain a judgment against you.
I suggest that you seek a free consultation with a bankruptcy attorney. He or she can advise you whether a payment the court would order in a Chapter 13 bankruptcy would be more or less than the amount that can be garnished from your income.
I suggest you contact your state and federal elected representatives. If everyone in your situation raised their voices, perhaps the problem would get more attention.
Fort Stockton, TX | January 04, 2013
I have a couple of questions:
- Would these circumstances warrant or grant me due hardship on these loans and get them dismissed?
- The lawsuit regarding the private loans will effect my grandmother, who was a co-signer and only receives Social Security. Can they garnish her benefit checks or seize her property?
I live in Texas.
January 07, 2013
- The rules for discharge of a student loan in bankruptcy court have some wiggle room for argument and application to individual circumstances. However, given you are able to work and recently found employment, I doubt a court would find you meet the criteria for a discharge. That said, consult with a Texas lawyer who has bankruptcy experience for an in-depth analysis of your situation. There may be facts you didn't disclose that might tip the scale towards a discharge.
- Read the Bills.com article May a Creditor Garnish Social Security Benefits? to learn why a judgment-creditor may not garnish or offset Social Security benefits. As you read in the first link I mentioned, Texas Collection Laws, it is possible for a judgment-creditor to place a lien on a judgment-debtor's real property, or in some cases seize their property with a writ a replevin.
Ask any follow-up questions you may have on the appropriate page.
Arlington, TX | November 09, 2012
November 16, 2012
"You could have up to 15 percent of your disposable income garnished, or withheld, from your paycheck each pay period to make payments on your student loan debt. If you have multiple loans held by multiple guarantors or the Department of Education (ED), you could have up to 25 percent of your disposable income garnished."
"By law, you have certain rights when you are facing Administrative Wage Garnishment, including:
- "You can inspect and copy records relating to your debt.
- "You can establish a repayment plan if an Order of Withholding from Earnings has not been issued.
- "You can request a hearing.
- "An employer may not fire you, refuse to employ you, or discipline you because your wages are garnished."
Consult with a bankruptcy attorney to learn if your income is low enough a court would not allow as much of your pay to go to paying the student loan debt as the garnishment will take.
Ocala, FL | November 06, 2012
November 06, 2012
Salt Lake City, UT | October 18, 2012
October 21, 2012
Mesquite, TX | October 11, 2012
October 12, 2012
General Wage Garnishment & Student Loans
If your delinquent loans are private, state wage garnishment rules apply. For an original creditor or collection agent to garnish your wages, it would need to file a lawsuit in state court, and assuming you mount an ineffective defense, the court would grant it a judgment. The judgment-creditor would then be able to ask for a wage garnishment (if allowed in your state), account levy, and property lien. You mentioned you reside in Texas. Texas collection law does not allow a judgment-creditor to garnish a Texas resident's wages. Wage garnishment is allowed for other reasons, such as child or spousal support.
If the loans are federal, then the Dept. of Education can garnish up to 15% of a person's wages administratively. Residents of all US jurisdictions are subject to this rule, regardless of their state's laws on wage garnishment. The Dept. of Education (and other federal agencies) may intercept your federal tax return. This is called "offset." The Dept. of Education may garnish wages and offset a tax return simultaneously — it doing one does not preclude the other.
Support Wage Garnishment & Student Loans
You mentioned existing wage garnishments for support. I will assume these garnishments equal or exceed 25% of your disposable income. If your delinquent loans are private, and the original creditor or collection agent obtains a judgment, it may not use the judgment to garnish your wages for two reasons: First, you are a Texas resident, and wage garnishment is not allowed for judgment-creditors. Second, the federal limit on wage garnishment is 25% of your disposable income. If your support garnishments are already "using up" 25% or more of your disposable income, then a judgment-creditor will need to stand in line until your support garnishments have concluded. As mentioned judgment-creditors can use account levy and property liens even though wage garnishment is not allowed for Texas residents.
If your loans are federal, the Dept. of Education may garnish 15% of your disposable income under the Debt Collection Improvement Act of 1996. However, as discussed in my October 4, 2012 answer to reader A.M. below, Congress set the amount employers may garnish at a maximum of 25%, with three exceptions (15 U.S.C. 1673). The Dept. of Education does not fit one of those exceptions. If your loans are federal, the Dept. of Education must wait in line until you satisfy your present support garnishment(s). The Dept. of Education need not wait in line to levy your financial accounts or place a lien on your property. Therefore, if your loans are federal, talk to your loan servicers now about the ways you can avoid default through a payment plan.
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