Stop wage garnishment with debt restructuring?
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Wage garnishment is a legal process that requires your employer to withhold part of your paycheck to repay your creditors. Your wages may be garnished because of unpaid child support, IRS back taxes, or past-due credit card balances, medical bills, or federal student loan debt.
If your salary is being garnished or you fear that it will be garnished soon, you have rights. You may be able to avoid a wage garnishment through a variety of strategies, including debt consolidation.
If you are considering a debt consolidation loan, you can do so with Credible Compare personal loan rates from different lenders in minutes.
What is a wage garnishment and how does it work?
If you default on a debt, the creditor can apply to the court for a wage garnishment order. The court can issue a wage garnishment that requires your employer to withhold part of your net income (the money you receive after all deductions). Your employer sends the garnished amount to your creditor or lender for them to use against your debt.
Most creditors can’t garnish your wages unless they’ve sued you in court and won a judgment (for example, if you’re behind on credit card payments). But if you owe tax debts, student loan money, alimony, or child support, those creditors don’t have to file a lawsuit to garnish your wages. You have a legal right to take the money straight from your paycheck.
The amount of your wage garnishment depends on the nature of your debt. For example, if you have consumer debt such as credit card debt, medical debt, or personal loan debt, your employer can garnish up to 25% of your disposable income, or the amount by which your disposable income exceeds 30 times the federal minimum wage is less.
In the case of a student loan, the maximum amount that can be seized under federal law is up to 15% of the available (net) remuneration. If you owe child support or child support, your employer can garnish 50% of your disposable wages if you have been late for less than 12 weeks and 55% if you have been late for more than 12 weeks. These numbers increase to 60% and 65% if you don’t support another spouse or child.
Restrictions on Attachment of Wage
The federal government restricts wage garnishment. Some types of income — such as Social Security benefits, disability benefits, pensions, and retirement funds like 401(k)s and IRAs — are exempt from attachment.
Child benefit and maintenance payments are excluded. However, remember that these revenue streams can still be confiscated once they reach your bank account.
How long does the wage garnishment last?
Wage garnishment may continue until you pay off your debt, pay it off, settle it under a Chapter 7 bankruptcy, or repay some or all of it through a Chapter 13 repayment plan. It’s important to note that filing for bankruptcy can stop wage garnishment for consumer debt, but not for court-ordered debt like child support and child support.
Can debt restructuring stop wage garnishment?
debt consolidation is when you convert multiple debts, like credit card bills, medical bills, and personal loans, into a new personal loan with a single payment. This can simplify the debt repayment process and give you the opportunity to secure a lower interest rate and monthly payment.
You may be able to stop wage garnishment if you consolidate your debt. Once you are admitted to a Debt Consolidation Loanyou can repay your creditors before you receive a wage garnishment notice. This strategy can give you more time to deal with your financial challenges and protect your credit score.
It is important to make payments on your debt consolidation loan on time and in full. If you think you’re going to have trouble making payments, let your lender know. It may be able to adjust your payment schedule or offer a deferral or forbearance as a temporary option.
With Credible it is possible Compare personal loan rates from multiple lenders without hurting your credit score.
How to qualify for a debt consolidation loan if your wages are garnished
If your wages are already being garnished, it can be difficult to get a debt consolidation loan. This is because most lenders require your credit history to be good. If your credit has faltered, lenders may be reluctant to approve you for a loan or offer favorable terms.
But maybe it’s still possible take out a debt consolidation loan. You may have a better chance of applying for a secured personal loan. To get the loan, provide collateral, such as e.g. your car. But if you default on the loan, you risk losing your collateral.
Does wage garnishment damage your credit score?
Unfortunately, Your credit will take a hit if your salary is garnished. An attachment order will remain on your credit reports for up to seven years.
The good news is that you can improve your credit score before and after wage garnishment. Start by creating a budget and sticking to it. Pay all your bills on time and try not to get into any more debt. You might consider taking a part-time job to earn some extra income while you work to pay off your debt.
When you decide a debt consolidation loan is right for you, Credible’s advice is quick and easy Compare personal loan rates to find the best option for you.
Other things you can do if your wages are garnished
If you are threatened with a wage garnishment but you do not want to conclude one debt consolidation If you have credit or cannot qualify for one, consider these alternatives:
- Set up a payment plan. Contact your creditors and explain what is happening. They may work with you to agree on a payment plan that better suits your financial circumstances.
- Submit an exemption request. Depending on your personal and financial situation, you can apply to your local court for an exemption to stop or reduce your wage garnishment. For example, some states have household exemptions for those who have a dependent, such as a child or elderly parent, whom they support financially.
- Consider bankruptcy. Filing for bankruptcy should always be a last resort as it will affect your credit score and your ability to approve credit for years to come. If you’re feeling overwhelmed by your debt and your credit score has already taken a hit because of your unpaid debts, you can speak to a bankruptcy attorney for more information. They could offer a free consultation.