Can you stop wage garnishment with debt consolidation?
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Wage garnishment is a legal procedure in which your employer is required to withhold part of your paycheck to pay off your creditors. Your wages may be garnished due to unpaid child support, IRS back taxes or overdue credit card balances, medical bills, or federal student loan debt.
If your wages are garnished or you are concerned that they will soon be garnished, you have rights. You may be able to avoid wage garnishment through various strategies, including debt consolidation.
If you are considering a debt consolidation loan, Credible allows you compare personal loan rates from various lenders in minutes.
What is wage garnishment and how does it work?
When you are late in repaying a debt, the creditor can ask the court to order a wage garnishment. The court can issue a wage garnishment requiring your employer to withhold part of your net income (the money you receive after all deductions). Your employer will send the garnished amount to your creditor or lender so they can apply it to your debt.
Most creditors can garnish your wages only if they’ve sued you and received a judgment (if you’re behind on credit card payments, for example). But if you have tax debt, money on federal student loans, alimony, or child support, those creditors don’t have to sue to garnish your wages. They have the legal right to take the money directly from your salary.
The amount of your wage garnishment will be based on the type of debt you carry. For example, if you have consumer debt such as credit card debt, medical debt, or personal loan debt, your employer can seize up to 25% of your disposable income or the amount by which your disposable income exceeds 30 times the federal minimum wage, according to the is less.
For student loans, the maximum amount that can be garnished under federal law is up to 15% of your available (net) pay. If you owe child support or spousal support, your employer can garnish 50% of your available wages if you’re less than 12 weeks past due and 55% if it’s more than 12 weeks. These numbers increase to 60% and 65% if you are not supporting another spouse or child.
Limitations on wage garnishment
The federal government places limits on wage garnishment. Certain types of income — such as Social Security benefits, disability benefits, pensions, and retirement funds like 401(k)s and IRAs — are exempt from garnishment.
Child support and alimony are excluded. But keep in mind that these sources of income can still be seized once they reach your bank account.
How long does a wage garnishment last?
Wage garnishment can continue until you repay your debt, settle it, discharge it in a Chapter 7 bankruptcy, or repay some or all of it through a Chapter 13 bankruptcy repayment plan. It is important to note that a bankruptcy filing can stop wage garnishment for consumer debts, but not for court-ordered debts such as child support and alimony.
Debt Consolidation is when you turn multiple debts, like credit card bills, medical bills, and personal loans, into a new personal loan with one payment. This can simplify the debt repayment process and give you the option to lock in a lower interest rate and monthly payment.
You may be able to stop wage garnishment if you consolidate your debt. Once you are approved for a debt consolidation loan, you can repay your creditors before you receive a wage garnishment order. This strategy can give you more time to deal with your financial challenges and protect your credit score.
It is important to make your debt consolidation loan repayments on time and in full. If you think you will have trouble making your payments, let your lender know. They may be able to adjust your payment plan or offer deferral or forbearance as a temporary option.
With Credible, you can compare personal loan rates from multiple lenders without affecting your credit score.
How to qualify for a debt consolidation loan if your wages are garnished
If your wages are already garnished, it may be difficult to get a debt consolidation loan. Indeed, most lenders require that your credit be in good standing. If your credit is poor, lenders may be reluctant to approve a loan or offer you favorable terms.
But it may still be possible to take out a debt consolidation loan. You might have a better chance of applying for a secured personal loan. In order to get the loan, you will put up collateral, such as your car. But if you don’t honor the loan, you risk losing your collateral.
Is wage garnishment hurting your credit score?
Unfortunately, your credit will take a hit if your wages are garnished. A garnishment judgment 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 setting a budget and sticking to it. Pay all your bills on time and try to avoid further debt. You might consider bothering to earn extra income while you work to pay off your debts.
If you decide a debt consolidation loan is right for you, Credible makes it easy and quick to compare personal loan rates to find the best option for you.
Other things you can do if your wages are garnished
If you’re facing wage garnishment but don’t want to purchase a debt consolidation loan or if you can’t get one, consider these alternatives:
- Establish a payment plan. Communicate with your creditors and explain to them what is happening. They could work with you to arrange a payment plan that best suits your financial situation.
- Submit an exemption request. Depending on your personal and financial circumstances, you may be able to file a waiver with your local court to stop or reduce your wage garnishment. For example, some states have a household exemption for those who have a dependent, such as a child or an elderly parent whom they support financially.
- Consider bankruptcy. Filing for bankruptcy should always be a last resort, as it will affect your credit and your ability to get loan approval for years to come. If you feel overwhelmed with debt and your credit has already taken a hit from your unpaid debts, you can speak to a bankruptcy attorney for more information. They might offer a free consultation.