Have you ever thought if Lenders can garnish your bank account as they hunt on recovering student loan debt? Garnishing Loans can be done in different ways depending on if your loan is a private or federal loan.
Your wages will not be tampered with until there is a default on your loan. So, therefore, defaulting a loan is what calls for garnishing. The loan will have defaulted if payments are not made for at least 180 days. When you stop making payments, the loan becomes delinquent and as such you attract default. There are basically three things you need to do –complete your payment up to date, or seek forbearance or deferment. You get to destabilize your installment plan on your student loan
Federal Student Loans
There is no order when it comes to loans, governing the judgment to garnish your wages. First and famous, It should be that the lender first sues you to court to obtain a judgment of garnishing your bank account. Federal lenders offing federal student loans don’t do this. You will only be sent a letter to your home address, offering you a 30-day notice that your wages will be garnished. Now, you can request for hearing in front of a judge to prepare your case.
The maximum that can be withheld from you when your Garnishing Loans is 15% of your disposable income, equal to the amount of your net paycheck after tax. In a scenario you work as an employee, your employer will withhold these funds and forward them to the rightful creditor.
Private Student Loans
The case is different in private student loans. This loan is not offered by the government, rather by private lenders. However, the creditor must seek justice because he/she has no right to garnish your wages. Thus, the first a creditor does is t sue the borrower to court to obtain a judgment. The court will approve a court order to your employer with details of the garnishment.
The amount to be garnished on this part depends on the state in which you live. Some states creditors can garnish up to 25% of disposable income, which is your wages after 30 times the minimum wage ($217.50). But some kind of income cannot be garnished such as social security payments, child support, disability benefits, IRAs, alimony, and pension, plus other retirement funds, cannot be garnished.