Can’t repay a loan and are afraid of the consequences? In the article, you can find information about circumstances when lenders can garnish your wage and how to prevent it.
Wage garnishment is legal only in specific cases, so read all the conditions to protect your rights and save your paycheck.
All of us can face unexpected expenses one day: a car breakdown, utilities, medical bills, etc. In such a situation, you immediately apply for an emergency cash loan. It allows you to get urgent money the next business day. According to the conditions of this credit form, you are going to repay the debt in a month, when you get your next paycheck. Unfortunately, difficult circumstances can appear at any moment and you may not be able to pay the loan back on time.
So, what should you do in such a case? And when can a payday loan lender garnish your wages?
Wage garnishment is a procedure, in which a payday lender garnishes a certain part of your paycheck to get back the sum you have borrowed. It happens when a borrower does not repay the debt on time. In case of a wage garnishment, your employer pays a part of your wage directly to the debt collector.
This process is pretty similar to bank garnishment. Bank garnishment occurs when a bank or credit union must allow payday lenders to seize funds from your bank account.
Yes, they can. A lender can garnish a borrower but only after they get a court order for it. This procedure is usually pretty long, and you can save your wage by protecting yourself in court with a lawyer. The most important thing for you is not to ignore any orders and notices.
Does payday lender garnish wages always legally? The legacy of wage garnishment depends on a certain state. In such states as North Carolina, Texas, Pennsylvania, and South Carolina a payday lender can’t garnish your wages. A debt collector or lender can get a wage garnishment order against you only if a debt relates to child support, IRS, tax, or court-ordered fines.
For most payday loan borrowers it is difficult to pay back the loan because it is a very expensive form of debt. Borrowers often try to repay their faxless payday loan debt on time but it is not always possible. So, what happens if you do not have an opportunity to repay the loan? Will you go to jail for defaulting on your payday loan?
Rollover. You can postpone repayment until your next paycheck. If you think that next month you will be able to repay your debt, you can pay a higher interest rate and pay back your loan in a month.
Payday lender garnishes your bank account. Usually, a payday loan agreement includes the possibility of taking money from your bank or credit union account for payday lenders.
Pressure. It happens that a payday lender will try to get back their money by using pressure. They can threaten you to make you repay the loan.
Collection agency. If the lender’s attempts to get money back are unsuccessful, they can contact a collection agency that will help to sue you.
Litigation. If you cannot pay back the funds, a payday lender will ask for a court order. They can’t garnish your wages without an order.
Not fair debt collection practices. Sometimes a creditor might try to collect the funds by violating fair practices. An example is when a lender garnishes your wage without a wage garnishment order.
Payment plan. Typically, borrowers repay the debt in one lump sum but sometimes, when they are unable to do so, a lender may allow repayment over a longer period, and discuss a payment plan with a borrower. This is much more expensive for borrowers but often, this is the only option to avoid wage garnishment.
Federal law has protection for borrowers which includes some limits on how much collectors can take from your wage. According to the law, payday lenders can garnish no more than 25% of a borrower’s disposable income or the amount by which a borrower’s weekly income exceeds 30 times the federal minimum wage, whichever is less.
When borrowers apply for guaranteed payday loans, it is usually a sum of $100-$1000, and in addition to this fees of $15-$30 per $100. Often, borrowers apply for a sum that they are not able to repay. In such cases, wage garnishment can be a serious financial problem for borrowers. To avoid it, you can take some important steps.
Discuss a repayment plan with your lender. Sometimes, creditors can see that you are interested in repayment and they may agree to create a repayment plan with you. This is a plan that shows a collector how you are going to pay back the debt.
Contact a nonprofit credit council service. Some banks or credit unions offer such an option for clients. The service can help you in negotiations with your creditor and the creation of a repayment plan.
Don’t ignore a lawsuit. Thanks to borrowers’ ignoring payday lenders garnish wages faster. It allows them to get a court order much easier, so do not be passive in such a situation. You always have a chance to protect your paycheck.
Defend yourself in a court. It may be necessary to hire a lawyer to protect your rights in court. A lawyer will help to save your wage and not allow a collector to get a court order to start the bank garnishment process.
Pay on time. The most important tip for all borrowers is on-time payment. Don’t apply for a loan if you are not sure that you will be able to repay funds on time. Fees in this credit form are very high.