Wage Garnishments And Student Loan Debt In Bankruptcy

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Having your wages garnished by a creditor can have a crippling effect on your financial wellbeing. Creditors can garnish your wages after filing a lawsuit against you, obtaining a judgement, and issuing a citation to discover assets. The court will then compel your employer to withhold a certain amount of money from your paycheck to pay the creditor. Only until the debt is paid in full will the garnishment stop. Although there are restrictions on how much a creditor can garnish, even a slight decrease in your income can cause you to fall behind on your other bills. Our bankruptcy lawyers in Chicago are experts in bankruptcy and can help you get your finances back on track.

Recently, the Department of Education (“DE”) has been aggressively garnishing wages from borrowers who are behind on their payments In just 3 months, the DE has garnished more than $176 million from borrowers. Unlike typical creditors, the DE can garnish wages through a more streamlined process.

In this blog, we will discuss the garnishment process and how bankruptcy can help.

What is the Garnishment Process in Illinois?  

For ordinary creditors to obtain a wage garnishment in Illinois, the creditor must first file a lawsuit against you for unpaid debt. Creditors will first serve you with a summons to appear in court. If you do not show up for any court hearings, they will receive a default judgement. Once they obtain a judgement, creditors issue a citation to discover assets to determine if you are working and what other assets you may have. The creditor will then petition to have the court sign an order compelling your employer to garnish your wages. The garnished wages will be sent directly to the creditor. In Illinois, the creditor can only garnish up to 15 percent of your gross income.   

With respect to the DE, the process is a bit less formal. To garnish your wages, the DE must notify you of certain things, including the right to: be notified of the Education Department’s intent to garnish your wages 30 days prior to garnishment, the amount of your debt, and your right to object to the garnishment; an opportunity to enter into a repayment plan, or otherwise work out an agreement with them directly; an opportunity to have a hearing on your objection to the garnishment; not be fired or discriminated against by your employer for having your wages garnished; and not have any information provided to your employer other than information necessary for the garnishment.

Rather than having your wages garnished by the DE, entering a repayment plan with the DE is a viable option. One payment plan option is enrolling in an income driven repayment plan. These plans consider your income and derive a payment plan that works with your budget. Additionally, a policy that was recently implemented caps monthly payments at 10 percent of your income. These payment plan options are not always ideal, especially if you are struggling to make ends meet without having to pay your student loans.

How can Bankruptcy help Stop Garnishments?

Filing for bankruptcy may be your best option to deal with wage garnishments. When you file bankruptcy, wage garnishments must stop immediately by virtue of the automatic stay. An automatic stay is imposed the second you file your case and prevents creditors from any action to collect on pre-bankruptcy debt, including wage garnishments.

Individuals have two options when it comes to filing bankruptcy: Chapter 7 or Chapter 13. To determine which bankruptcy is right for you, contact us to speak with a Chicago bankruptcy lawyer. Bankruptcy can be very complex, which is why it is important to contact an experienced bankruptcy lawyer. Having represented thousands of people in bankruptcy over the past decade, you can trust the attorneys at DebtPros to give you the best advice.

Call DebtPros Now to Speak with a Chicago Bankruptcy Lawyer

If your wages are being garnished or about to be, it is important to act fast. Any deductions taken before you file bankruptcy will not be refunded to you. At DebtPros, we offer free consultations and same day filings. The bankruptcy attorney you speak with will review your situation and carefully analyze the best route to not only stop your wage garnishment but also eliminate your other debt. Call us now at (312) 883-5422 to receive your free consultation!