Are you in danger of a wage garnishment?
Falling behind on your bills can be scary. Nearly everyone has a period of time where things get tight, and some obligations have to be set aside until matters are settled. This seems to be occurring more often lately as medical costs climb and jobs are less reliable.
No matter the reason for your financial struggles, you may be feeling a little anxious. As long as your paychecks keep coming, you may be feeling hopeful. Howevere, creditors can garnish your wages when you fall behind on your payments.
The government will get its share
Did you take out a federal loan for your college education? Countless people believe it is worth it to take on astronomical debt for the sake of a degree that will certainly land you the job of a lifetime. Unfortunately, that doesn’t always happen right away (or may not happen at all. This may cause you to get behind on loan payments quickly.
If you go 270 days without making federal loan payment, the federal government considers your loan in default. The consequences are costly. The government can take up to 10 percent from your paycheck before you even get paid. If you are already struggling financially, losing another 10 percent of your paycheck may have devastating consequences.
The same is true for unpaid federal taxes. Not only will the government have the right to seize all your federal income tax refunds and part of any state refunds until your debt is current, but they can also garnish your wages.
Others who can claim your paycheck
Courts can order the garnishment of wages for nonpayment of child support and alimony. In fact, if you are divorced and not remarried, the court can garnish up to 60 percent of your disposable earnings to pay any child or spousal support you may owe.
Private creditors — like credit card companies or medical facilities — may threaten to take everything you own, but, in reality, they need a court order to garnish your wages. While some may not want to go through the trouble, those who do are limited in the amount they can take. However, that may be up to 25 percent of your earnings. Also, in the case of your car or your home, those creditors may not garnish your wages, but they will certainly threaten repossession or foreclosure.
Don’t assume that your income will automatically increase as the years go on. Don’t leave your future to chance. Learn about your debt relief options so you can keep what you make.