Can Payday Loans Garnish Your Wages?
George Simons | December 02, 2022
Summary: Did you take a payday loan and neglect to pay it back? Find out if payday loans can garnish your wages.
Short answer. Yes, a payday loan lender can garnish your wages. But only under specific circumstances. Here's all you need to know.
Payday loans are meant to be paid back within a short period, usually on the borrower's next paycheck. However, things don't always go as planned for the borrower, forcing them to forfeit payment. In addition, since these loans are often high-interest loans, they can quickly turn into huge debt due to penalties and accumulated balances.
If you're in such a situation, your creditor may file a lawsuit against you, resulting in a wage garnishment order. So the question is, what can you do to avoid payday loan wage garnishment?
Avoid wage garnishment by filing a response to a debt collector with SoloSuit.
How do payday loans work?
The average repayment period of a payday loan is about two weeks. Different states set varying limits of this loan, usually ranging between $100 and $1,000. The loan also has a finance charge of between $15 and $30 per $100. This charge translates into an interest rate of at least 390% by the end of the lending period.
Usually, a borrower writes a postdated check that the lender holds until payday when the debt matures. Alternatively, the borrower may write an authorization for electronic debit to allow the lender to debit the money from their bank, prepaid card, or credit union. This process enables the lender to collect their money from the borrower's account when the debt is due.
Sometimes, the borrower can redeem the check by making a cash payment to the lender instead of the bank deposit. But if the borrower can't pay off the loan by the next payday, they may pay the debt's finance charge, allowing it to be rolled over to the next payday. Alternatively, the borrower may extend the loan period, but this comes at a fee. Both alternatives depend on the laws of the state and the regulations set by the lender.
Typical payday loans are usually payable in one lump sum, although some lenders allow for installments over a longer period. Despite that, payday loans are among the most expensive types of loans many borrowers fail to keep up with. As a result, a good number of borrowers end up deserting their debts.
Don't ignore debt collection lawsuits. Respond with SoloSuit
What happens if you fail to pay your payday loan?
- The lender may either try to cash the postdated check or make an electronic withdrawal from your bank. If you have an insufficient balance, your bank may charge you overdraft fees.
- The lender will also try to contact you for payment, and if the efforts aren't successful, the lender may forward the debt to a collection agency.
- The collection agency will use all means possible to recover the debt, and if all fails, they may file a debt collection lawsuit against you.
- If the collector wins the case, they may be awarded a wage garnishment order to collect their payment directly from your paycheck.
What is wage garnishment?
A wage garnishment is a court order that requires an employer to withhold part of an employee's earnings and send it directly to a creditor to pay a debt. But before the lender receives a wage garnishment order, they must file and win a lawsuit against you.
When the lender sues you for debt collection, it's always advisable to answer the lawsuit immediately and appear for court hearings if necessary to avoid a default judgment. If you don't know how to answer a debt collection lawsuit, SoloSuit provides an easy, three-step process to help you create an attorney-approved answer within minutes!
Like other lenders, there's a limit to how much a payday lender can garnish from your wages. They can either take whichever is lesser, between 25% of your disposable income and the amount that your income exceeds 30 times the federal minimum wage.
Protect your wages by responding with SoloSuit.
How to avoid a wage garnishment order
Rather than ignoring your payday debt, there are several things you can do to settle it amicably with the lender. Here are a few tips to consider:
Try negotiating with your lender. Many lenders dislike the tedious debt collection tactics and would welcome a borrower interested in working out a repayment plan. Seek non-profit credit counseling services, especially if you have more than the payday loan debt to worry about. These services can help you plan your finances even better.
If the lender files a lawsuit, ensure that you answer and attend all the court hearings to stand a fair chance of arguing your case. The judge may consider a repayment plan over wage garnishment. You can use SoloSuit to file an attorney-approved answer for your debt collection lawsuit within minutes!
Ignoring payday loans may lead to huge debts that you never intended to incur in the first place. Unfortunately, a wage garnishment order may also lead to bigger financial problems, especially if you have a lot of responsibilities to take care of. However, no matter how hard the situation is, it's always possible to negotiate a repayment plan with the lender.
This process starts by filing an answer to your debt collection lawsuit via SoloSuit. This software generates attorney-approved answers to debt collection lawsuits and then sends a copy to the complainant and another one to the court.
What is SoloSuit?
SoloSuit makes it easy to respond to a debt collection lawsuit.
How it works: SoloSuit is a step-by-step web-app that asks you all the necessary questions to complete your answer. Upon completion, you can either print the completed forms and mail in the hard copies to the courts or you can pay SoloSuit to file it for you and to have an attorney review the document.
Respond with SoloSuit
"First time getting sued by a debt collector and I was searching all over YouTube and ran across SoloSuit, so I decided to buy their services with their attorney reviewed documentation which cost extra but it was well worth it! SoloSuit sent the documentation to the parties and to the court which saved me time from having to go to court and in a few weeks the case got dismissed!" – James
>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate
>>Read the NPR story on SoloSuit: A Student Solution To Give Utah Debtors A Fighting Chance
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