Wage garnishment is designed to be an easy way to allow you to repay your loan if things are getting on top of you. A payday lender can garnish your wages but only in very specific circumstances. Wage garnishment cannot be taken by the lender automatically, in order to set up a wage garnishment your lender will need to go through a lengthy court process. Your lender will never contact your work to request a wage garnishment without your knowledge. Wage garnishment will never be the first step in a lender collecting the money you owe.
What is a wage garnishment?
Wage garnishment is when your employer holds back a legally required portion of your wages for your debts. This means the amount you owe every month is taken directly from your wages and never enters your bank account. That means it goes straight towards paying off your debts. How exactly wage garnishment works depends on the state you live in, as rules and procedures vary slightly depending on the state.
Can I avoid wage garnishment?
Yes, wage garnishment can absolutely be avoided if you are able to repay your debt on time. In the majority of situations wage garnishment can be easily avoided. If you are unable to repay your loan you can still avoid wage garnishment by communicating openly with your lender. When you start to have difficulty making payments, call your lender and let them know you are struggling.
In most cases they will be able to offer you a payment plan that works better for you, but honest communication is key. Remember that going to cost and setting up a wage garnishment is an expensive option for a lender. The lender’s ideal scenario will be working out an arrangement with you that allows you to pay your debt.
Will I be warned about a payday lender taking my wages?
Yes, wage garnishment will never be the first option when you fall behind on payments and it will never happen without your knowledge. Wage garnishment is not possible without a court order, so you will never be caught unawares. When you first start defaultingon your payday loan your lender will likely attempt to withdraw the money they are owed straight from your account, which can mean bank fees for you.
If your lender is unable to reclaim the money they are owed, they will resort to collection calls and even lawsuits. Once you begin to fall behind on payments you may well be incurring additional fees on top of what you owe. Any fees will be clearly detailed in your loan agreement. Once the agreed loan period has passed the lender who you borrowed from will continue to seek any unpaid amount on your loan.
The best way to handle falling behind on payments is to get in contact with your lender. Most lenders will work hard with you to come up with a sensible repayment plan, rather than taking you to court. Taking you to court is one of the most expensive options for a lender, and if they can avoid it they will. Keep communication open and seek the support of the advice of a financial advisor or a debt advisor.
Remember, during the time in which your loan is not being paid, it will still be accrediting interest.
What will the court process look like?
Taking you to court will always be a lender’s last resort. Wherever possible your payday lender will try to arrange a sensible repayment program that caters to your needs. It is important that you keep the lines of communication open to allow this.
However, if co-operation stops or you are unable or unwilling to repay your loan your lender may take you to court. Payday lenders don’t just go to court over large cases either. Many lenders will be willing to go to court over relatively small amounts of money. So you shouldn’t be surprised if your lender takes you to court over a relatively small loan.
If a lender does take you to court, the most important thing is that you show up. You should never ignore a lawsuit. If you do not attend your hearing, it is likely your lender will automatically win the case. It is always in your best interest to attend court.
If the lender wins, or if you do not dispute the lawsuit or claim, the court will enter an order or judgement against you. The judgement against you will state the amount of money you owe, this will include any interest you have accrued since you stopped making repayments. At this point the lender or collector can then get a wage garnishment order against you. This means a set amount will be automatically taken from your paycheck and go instantly to your lender to repay your debts.