Student Loans and Garnishment

When you stop making payments on federally guaranteed student loans one of the actions that can be taken by the lender is to garnish your wages.

This action can be taken by the lender without going through the court system.  Furthermore, under Federal Law your wages can be garnished for federally guaranteed outstanding student loans regardless if you live in a state that prevents such garnishments from occurring.

When the agency that guaranteed the loan issues a garnishment order they are required to send you notification at your last known residence at least 30 days before the garnishment is sent to your employer.

This 30 day period is required in order to give you the opportunity to have your day in front of a judge.  You are given the opportunity to have a hearing in front of an administrative law judge as well as time to review and copy your student loan records.  In order to avoid having your wages garnished, the lender can give you the opportunity to enter into a payment plan in which a schedule for making up the late payments is set up.

When your wages are garnished the amount taken from your paycheck cannot exceed 15% of your income.  The garnishment cannot take the equivalent of more than 30 times the current minimum wage.  Recently, President Obama signed an order that is set to take place in 2014 in which garnishment on student loans cannot exceed 10% of your disposable income.  In this instance, disposable income is considered what you take home after taxes and deductions are taken out of your paycheck.

Other actions that can be taken when you are delinquent on Federal student loans include the taking of federal benefits in order to pay the loans.  This includes retirement benefits and disability benefits.  The government cannot take more than 15% of your total benefits, cannot take any amount that would leave you with less than $9000 per year or less than $750 per month.

For example if you receive $1000 per month is a government benefit, the government can take either $250 or $150 (15% of your $1000 per month benefit).   In this instance the government would take the lower amount, $150.

If you had a wage garnishment before you lost your job and now you find new work, you must be continuously employed for 12 months before the garnishment can resume.

Lastly, a student loan lender has the option of bringing suit against you.

In order to stop garnishments and suits related to student loans you can file bankruptcy.  Under bankruptcy you will be protected from further garnishment or lawsuit by the automatic stay.  This is in place as long as you are in bankruptcy.  A chapter 13 bankruptcy would be your best option in this case.  A payment plan would be devised in which you would pay back the amount you are deficient over the period 3-5 years based on your income.  In some situations student loans can also be discharged and wiped out completely. Whether student loans can be discharged depends on the specific facts of a case. Often, a debtor becomes permanently ill or disabled with no prospects of earning sufficient money to pay a meaning full amount towards the student loan debt. If you are living in the St. Louis area, or in the St. Louis Metro East area and consider filing bankruptcy, please contact one of our bankruptcy attorneys for a free consultation.


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