Another great question by a former client today: She has some outstanding student loans and is worried about student loan garnishment on her wages and/or her checking account. She also questioned whether she was breaking the law. Here is my answer:
First, it is NOT illegal to owe someone money. So, it is not a crime.
Usually, the loan company can get a student loan garnishment without a court order – they don’t have to go to court. All they have to do is send you written notice:
- at your last known address (right?)
- at least 30-days before issuing a garnishment order to your employer.
With a student loan garnishment, they get 15% of your after tax income (The amount must be less than 30 times the hourly minimum wage). – Unless, the student loan company takes you to court and gets a judgment (they usually don’t). The rules are a little different for a judgment creditor garnishment. The creditor gets 15% of the gross.
It is my understanding, if you were recently unemployed, the student loan garnishment cannot be issued until you have been continuously re-employed for more than 12-months.
Without a court order, I do not believe they can reach the money in your bank account (I have seen some conflicting stories on that). I have never seen that happen. (remember, without a court order).
You have to know they can take your Tax Refund too, again without a court order. Same rules apply. They have to send you notice, just like the wage notice. If you file married filing jointly (usually the best way for a husband and wife to file) any refund will be used to set off the student loan – all the refund. They do not split between husband and wife – they take it all.
It may be best to try to workout some sort of payment with them. You know I would be happy to help you do that.