Yes, a payday lender is able to garnish your wages but only in very specific circumstances. For example, if your payday lender has taken you to court and a judge has allowed them to garnish your wages. Wage garnishment is rare, but something you should be aware of.
If your lender is allowed to by court order, they are able to garnish your wages.
What Is Wage Garnishment?
Wage garnishment occurs when your employer holds back a legally required portion of your wages to cover your debts. That portion of your paycheck never makes it to you. It is sent straight to your debtor.
Bank garnishment occurs when your bank or credit union is served with a garnishment order. Depending on which state you live in, the rules and procedures may vary slightly. Each state will have different procedures and exemptions from garnishment.
Will I Be Told If My Wages Are Garnished?
Yes. Wage garnishment cannot be imposed without a court order, and you will be aware of the legal proceedings and outcome. When you first start defaulting on your payday loan your lender will likely attempt to withdraw the money they are owed straight from your account, which can result in bank fees for you.
It is only if they are unable to reclaim their money that they will resort to collection calls or lawsuits. It is at this point that wage garnishment becomes a pressing possibility.
If you find that you are struggling to make payments, like 86% of payday loan borrowers, you should 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.
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 For Wage Garnishment?
If your lender is unable to reclaim their money because you are not cooperating, then they may choose to take you to court.
Lenders in states like California, Texas and Illinois are no strangers to going to court over small loans. Don’t think that you are exempt because you’ve borrowed a small amount of cash.
If a lender does take you to court, you must show up. You should never ignore a lawsuit. A lot of lenders automatically win cases, because their clients do not show up to court. It is always in your best interest to attend court.
If they win, 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. At this point the lender or collector can then get a wage garnishment order against you.
You could be threatened with legal action if you miss loan repayments
Can I Avoid Wage Garnishment?
Yes, in the majority of situations wage garnishment can be avoided. The easiest way to avoid wage garnishment is to communicate 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.
You also have other options when it comes to not paying off your payday loan, including declaring bankruptcy or entering into an IVA. If you are struggling to pay your loans, consider these ways of getting help.
