Wage Garnishment Advice -

[Anonymous]

I am currently getting my wages garnished from a collection agency for student loans. I owe around $30k. I called in and was told that I could make a one time lump sum payment of around $25k. I told them I could not make this huge payment but was told that If i sent in a letter stating why I could not make this much I might be able to make a lower one time lump sum payment. Any advice on this?

[Anonymous]

Send them a letter telling them how much you *can* come up with. They'll either say yes or no.

[bstone]

Are these federal student loans or private?  If they are federal, you may be able to rehabilitate the loans, consolidate them (even if they are already consolidated you can do it again to get them out of default) and get them out of collection status.  Being you are already being garnished I don't know the specifics how that would work.  In a prior life I did collections on student loans and this was something we worked with a lot.

If they are private, well, they are their own animal and I can't provide much help.

[redheadtempe36]

+1 to Bstone

If they are Fed, you have options.  

Personally, I consolidated mine.  If you rehabilitate, they will remove the delinquent records from your credit report, so that is ideal.  However, in my case (I don't know if this is SOP), they wouldn't stop garnishing my check until the loans were rehabilitated, so that meant they would be both garnishing my check, and I would have had to make regular payments for 9 months.  Just couldn't do it.

In the end, my FICO score had already taken the hit, so consolidating made the most sense for me.

If they are private loans ....

I'd honestly start the bankruptcy process.  Now, you will not be able to discharge the loans, but they will be forced to stop the garnishment, and maybe you can work something out with them, and you ... may or may not go through the whole CP13 process depending on your other obligations.

[Anonymous]

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@redheadtempe36 wrote:

+1 to Bstone

If they are Fed, you have options.  

Personally, I consolidated mine.  If you rehabilitate, they will remove the delinquent records from your credit report, so that is ideal.  However, in my case (I don't know if this is SOP), they wouldn't stop garnishing my check until the loans were rehabilitated, so that meant they would be both garnishing my check, and I would have had to make regular payments for 9 months.  Just couldn't do it.

In the end, my FICO score had already taken the hit, so consolidating made the most sense for me.

If they are private loans ....

I'd honestly start the bankruptcy process.  Now, you will not be able to discharge the loans, but they will be forced to stop the garnishment, and maybe you can work something out with them, and you ... may or may not go through the whole CP13 process depending on your other obligations.

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That may not be the case. They CAN be discharged if the debtor can successfully demonstrate that repayment creates a financial hardship.

[Anonymous]

Hello and thanks for the help. What do you mean by consolidating? I found out that they are federal loans. I was told that I can do rehab and it would be 5 months of rehab payments and garnishment before they could end the garnishment and pull my loans of of delinquency. They were asking me to provide employment information about how much I made etc. I did not want to provide this information.

[bstone]

If you're being garnished they already know where you work, and likely an idea of your income (usually the garnishment is a percentage of your wages), so you're not hiding anything from them.  You're just proving to them how difficult you may be to work with...

The benefit to rehabilitating the loans is getting them out of garnishment, and a (likely) lower payment.  Sure, you can allow them to garnish your wages until the entire $30K is paid off, plus the interest is generally higher on defaulted loans as well, or you can rehab the loans, get the negative mark off your credit and save some interest with a (hopefully) lower rate.

The only downside to doing the rehab is you're going to be garnished AND you have to also make voluntary payments for generally nine months, on-time, every month.  One day late and you start all over.  Usually the payment is 1% of your balance, so about $300 per month, on top of whatever they are garnishing already.  If you can do it, you need to.  Defaulted student loans will keep you from going back to school (if you wanted to), will keep you from taking Parent PLUS loans for your kids (if necessary), will keep you from buying a home and will likely result in your federal and possibly state tax returns being offset every year until the debt is paid in full.

[Anonymous]

Thank You bstone!