Wage garnishment is a court procedure in which any person who fails to repay a loan gets the income withheld. Among other debts such as auto loans, mortgages, and medical bills, payday loans are also subject to wage assignment.
Failing to pay on time will induce collection calls, extra court fees, lawsuits, and finally, wage garnishment. There are legal restrictions in garnishments that prevent collectors from getting your entire salary. Still, settling the debt for a loan in full and on time is your best alternative to avoid garnishment.
Hoping that the debt will disappear or that the payday lender won’t try to get your wages garnished won’t help you. If all negotiations and claims fail, you might turn to bankruptcy as the ultimate tool to settle any outstanding debts.
Is not paying a payday loan considered harmful?
Not paying payday loans in due time is detrimental to your financial health. Lenders will try to urge you to repay your loan by any means possible, including legal maneuvers like wage assignment, within the legal limits, of course!
The US Department of Labor, for instance, prohibits employers from firing employees whose earnings are subject to wage garnishment. The state law applies to any debt and specifies the exact amount that can get garnished in any week. Unfortunately, you won’t get protection if a second or subsequent wage assignments take place.
On top of that, missing any payments of any type will always hurt your credit score.
Can you be served for not paying a payday loan?
Not settling your payday loan can have severe consequences for you and your assets. The sooner you realize that payday lenders start automatic withdrawals and wage assignments, the better. The first approach they take is withdrawing funds from debit accounts, and each attempt to do so accrues additional fees.
By federal law, lenders can’t reveal your financial situation, but they can send you letters from lawyers and contact references. Remember that failing to settle payday loans is not a criminal offense, so you can’t go to jail for it. If you receive arrest threats, the Consumer Financial Protection Bureau suggests you contact your attorney to seek legal protection.
Can a payday lender garnish my wages?
Payday lenders that have the right to garnish your wages will ensure this action takes place. Some loan companies might sell your account to debt collectors who report loan defaults to the bureaus. Others will take you straight to court for defaulting on a loan.
Failing to pay your payday loan off can instigate any debt collector to sue you. Only after they win the claim and no dispute gets initiated by your side, can the court issue an order against you. Such a court order or judgment entails the amount you owe. Once the procedure is over, the payday lender can garnish your wage by way of a garnishment order.
How can I stop payday loan garnishment?
The last resort lenders have to collect loans is wage assignment, which, if involuntary, can lead to garnishing wages by the court. If you take off to reduce or stop payday lenders garnish your wages, ask for court or legal help.
The first strategy is to file a claim of exemption with the court. If approved, such an exception can protect you from garnishing individual earnings for payday loans purposes. Courts might also allow you a fixed income amount that you can keep from payday lenders to take care of living expenses. Depending on the state and your situation, you might fully or partially protect your wages.
Though not recommended and certainly not desired by many, you can always resolve the matter by filing bankruptcy. Of course, you won’t file for bankruptcy for a small payday loan debt, but only if unsecured loans exceed your income. Remember that even in case of bankruptcy, you get to exempt some belongings that are essential to run a home.
How can I avoid wage garnishment?
In practice, you have three options available to avoid wage garnishment imposed by payday lenders. Read on and learn what your legal options are to avoid losing at court as well.
- Be present. Always show up at the court when you get summoned. In reality, most debt collectors hope that you’ll get scared by wage assignment and won’t come to court. If you act so, they’ll force your wages garnished and win the case. But when you show up, a payday lender must prepare a court case and might not be willing to do so to the extent they threaten.
- Try negotiations. Avoid ignoring calls from lenders and take the chance to negotiate. It’s best to step up with the lowest payday loan offer so that you can meet halfway. Most collection agents don’t expect to have the full amount paid off, so this is your opportunity to repay your loan.
- Fight back. According to the US Government, some practices are off-limits even for debt collectors. Exploit this option if you identify any violation of your rights by intimidating you into paying. Lenders also cross the line by harassing you with repeated phone calls, making false statements, or court claims of an eventual arrest. Learn your rights under the FDCPA and don’t accept unfair and illegal treatment.
Summary
Overall, defaulting on any loan, including payday loans, is a bad financial strategy that can only accrue debt and lead to garnishment. Your best shot is to find a viable alternative to get rid of any obligations as soon as possible. If everything else fails, you should view going to court and filing for bankruptcy as the last resort solution.
We hope this brief article was of great help to any troubled loan-taker. Now that you know your rights and obligations, you can focus on a repayment strategy. As always, we’d love to hear your thoughts and ideas on the topic in the comment area below!
In some countries the wage garnishments can not exceed the 1/3 of a monthly salary due to the fact that the person has to live and pay other expenses. However everyone can check the laws in their own country.
Nobody wants to go through court procedures and to pay huge amounts on interest rates and fees for late payments. One way to avoid this is to make sure that you can pay everything on time. But as bad situations and unplanned expenses happen every day it is better once when you see that you can not pay on time to start negotiating with the lenders to postpone some payments or to recalculate and pay the minimum until your situation come to better terms. The lenders are more willing to postpone or to offer different terms and to be sure that the amount will be paid in full than to take some drastic measurements and to go to court. The court is the last that they want to do. So yes they are willing to negotiate. As a matter of fact they are just doing their job as everyone else and they are not some monsters that do not have families and their own life.
Wages garnishments are not pleasant thing. But as all of the things happen in life, it happened me a couple of years ago. I was not paying attention and was late with the payments. Thankfully it is finished now. It ruined my credit score so I am still unable to take some loans. If I have to do it again I would rather avoid whatever it takes and try to negotiate or even to borrow some money to pay the loan rather than to be in a situation like that. I am paying more attention now, but as they say everybody learns on his own mistakes.
Very useful information regarding the ways how to avoid threats and intimidation from lenders.
It is the best to make sure and to avoid dragging to courts, paying expensive lawyers and high interest rates and loans that can triple the amount of the initial loan acquired. However it is not the end of the world and everything happens.
I was late with a couple of payments on my credit card, so the bank decided that I have to pay the whole amount on my credit card and to close it. I payed the amount and the it was closed but it prevented me of getting another credit card for years. So no, the best is to settle everything on time. Situations like this may interfere your credit ability and they are not the best solution. Anyhow, I will not do it again even if I have to borrow money to pay it on time.
I am pretty annoyed with the banks. They blocked all my credit cards and all the transactions. It took me two weeks to explain that there was probably a mistake. Except apology I didn’t get anything else. And I was blocked for two weeks which meant that I was not able to pay anything and I was late with some payments. So yes, they make mistakes and make us late with our payments. And it is not a fair treatment.
To come to wage garnishments it has to pass through court which means that you have to be informed. For payday loans it is not usual to have a wage garnishment but some of the payday lenders use that as an extreme measure when all of the other sources are exhausted. So it is better to find some way to pay it and not to wait to go to court.
Payday loans usually if you do not pay the money before due time, withdraw money automatically from your bank account. If you do not have your salary on time it becomes an instant problem. Check your transactions on time, and you will not have problem with it.
Informative article, thank you.
Being in a situation when I have a wage garnishment for almost a year, I can say it is not easy to cope with all the other expenses in between. And from this point of view I will do anything to make sure this will not happen to me again if I only have 1% chance to stop it.
The main issue is whenever you come into a situation to being late with your payments, the most smart decision is to hire some legal help and ask for all the possible solutions. Usually we think that we know some of the laws but there are people that can help us avoiding situations like courts and wage garnishments.
Payday loans are not something that I am fan of, but unfortunately we need them. I just make sure to pay them on time, because I do not want to come into situation to ruin my credit score or to go to court.