Stop Garnishment

News and Tips

Student Loan Debt Is Not Easy To Walk Away From

Many people believe that you can escape creditors by filing for bankruptcy.

Sometimes it is your only way out of an ever deepening debt although life can get a bit more complicated after that.

The one type of loans that are not automatically erased after a bankruptcy are student loans. They can haunt you for a very long time unless you are able to prove undue hardship because of them.

There is an interesting article in the Arizona Daily Star to illustrate this:

Student loan debt is not easy to walk away from. In fact, private and federal student loans are not eligible for discharge in a bankruptcy filing unless you can prove that paying them would produce an "undue hardship" for you and your dependents. The burden to prove undue hardship varies from state to state and court district to court district.

Read more: http://azstarnet.com/business/local/credit-care-discharging-student-loan-in-bankruptcy-requires-major-hardship/article_58538921-df60-52c2-9bf0-a07470fc07bc.html#ixzz1krD3ziq8

Not Many Options Available To Help Pay Off Private Student Loans

There is an interesting article about the new initiative to provide relief for college graduates struggling to repay student loans.

source USA Today: Few options available to help pay off private student loans

In a speech at the University of Colorado in Denver, Obama said the plan will lower monthly payments for 1.6 million borrowers

In a bad economy there can be different reasons why you are having trouble paying back you student loans, like unemployment or a lower than expected salary.

The government can allow a reduction in payments and even forgive the loan balance after only 20 years instead of 25.

This is not good news for everyone though.

Private loans, which aren't issued or guaranteed by the federal government, have few of the protections provided for borrowers with federal student loans.

Private lenders want to see their money back with interest and they are usually not inclined to make it easy on you.

So it is important to max out all other options before turning to private student loans, even if low interest rates make them seem attractive.

Rebuild Your Credit After Wage Garnishment

Imagine having a student loan and repaying it regularly. Then there comes a day where you have some financial misfortune in your life and you skip some payments.

Before you know it you are getting way behind on your payments and the effect on your credit score can end up a disaster.

This excerpt from a letter to Fox News is an interesting read:

Federally granted student loans always start off great, with low interest rates and favorable terms. Keep them in good standing and life is grand. Allow them to descend into default, however, and you get in trouble.
The damage to your credit report begins with your first missed payment, but your credit score really takes a nosedive when the loan defaults. Having the big "D" on a credit report is terribly damaging.
It gets worse when your wages are getting garnished since these payments will not restore your credit score.

Read the original story at:

How To Claim Exemptions From Garnishment

Is your paycheck being garnished? If so, you know how difficult this can make your overall financial situation and chances are it wasn't good to start with.

Thankfully, federal law does place a limit on how much can be taken out at any one time. When a normal garnishment has been put into place, a maximum of 25% of your income may be taken out. If you meet income requirements though, this amount may be less under the law. The major exception is child support. If you are behind on your support payments, the limit is raised to 50%.

If you wish to claim exemption from garnishment, there are a few things you should look into. Paperwork will need to be filed to prevent the garnishment from occurring and a hearing will be held.

Social Security benefits are just one of the exemptions from garnishment unless you deposit them into a bank account. If you deposit your money and wish to continue this exemption, you will need to file paperwork to prevent the garnishment.

The same is true of veterans benefits unless you owe back federal taxes, spousal or child support. Laws concerning veterans benefits do vary by state so you need to learn the laws in your area. 

This is also the case with many other government benefits. If you believe your wages are being unfairly garnished, you will need to fill out some forms to stop this from happening again.

Check with your state to determine what other steps you need to take. The best way to stop a garnishment though is to speak to the creditor. He or she may be willing to work with you to get the issue resolved.

Obama Administration To Lower Student Loan Payments

For many students about to get caught in the "debt trap" this news will be welcomed with joy.

The Obama Administration announced it is taking steps to increase college affordability by making it easier to manage student loan debt. The announcement is part of a series of executive actions to put Americans back to work and strengthen the economy.

In a global economy, putting a college education within reach for every American has never been more important, but it’s also never been more expensive. That’s why today we’re taking steps to help nearly 1.6 million Americans lower their monthly student loan payments.

The Administration is moving forward with a new “Pay As You Earn” proposal that will reduce monthly payments for more than one and a half million current college students and borrowers. Starting in 2014, borrowers will be able to reduce their monthly student loan payments to 10 percent of their discretionary income.

But President Obama realizes that many students need relief sooner than that. The new “Pay As You Earn” proposal will allow about 1.6 million students the ability to cap their loan payments at 10 percent starting next year, and the plan will forgive the balance of their debt after 20 years of payments.  Additionally, starting this January an estimated 6 million students and recent college graduates will be able to consolidate their loans and reduce their interest rates.

An interesting take on this subject can be found in this article by Mike Konczal: Student Loans: The Debt You Carry for Life

According to the Project on Student Debt, the average debt load for graduating seniors in 1996, when this law was passed, was $12,750. Now it is over $23,200. 

When it comes to collecting on student loans, the government can take funds from your Social Security check. There are rules to the offset: the first $750 a month can’t be touched, and only 15 percent of benefits above that can be taken to pay back student loans.

Garnishing Social Security to pay off student debt ensures that the economic crisis will haunt today’s graduates well into their retirement.

Investigate Loan Forgiveness Programs

Your college career may have come to an end, but now your real work will begin.

I don't mean your job in your chosen career field, I mean repaying your student loans. Sixty days from college completion you have to start repayment.

The average student earning a bachelors degree owes $20,000 in student loans. Vocational students owe $10,000. Students in professional programs requiring a masters degree or higher owe an average of $100,000. This all comes at a time when you are beginning to be thinking of developing a relationship and settling down.

Be smart. Investigate the loan forgiveness programs that will reduce part or all of your student loans if you choose to work in areas that are underserved.

Teachers who are willing to work in a low income public school, or teach math and science classes in areas where there are not enough teachers, or with disabled children can greatly reduce or eliminate student loans.

Nurses willing to work in inner city hospitals or low income neighborhood clinics can eliminate their debt.

Lawyers and doctors who agree to work a certain number of years with disadvantaged people can also wipe out their debt while they are gaining professional experience.

Student Loan Default Rates Rise

The Department of Education released recent data that stated approximately 8.8 of all student loan borrowers defaulted in the fiscal year that ended September 30, up 7 percent from the previous year. 

Public institutions suffer from a rate of 7.2 percent, up from 6 percent, and not-for-profit private institutions suffer from a rate of 4.6 percent, up from 4 percent. 

The deputy under secretary of education, James Kvaal, says that borrowers are struggling in this economy. He also stated that there is a strong relationship between student default rates and unemployment rates. 

These default rates are the highest since 1997; they were 8.8 percent in 1997, as well. However, the highest unemployment rates occurred in 1990, when they were 20 percent. 

Though the rates are high, education remains to be a very important factor for a recovering economy. In fact, secondary education has become the concern of the nation. Without higher education, the economy will continue to suffer. Economy experts urge single parents, laid off workers and young adults to enroll in some type of secondary education. 

More importantly many students do not realize that there are programs designed to help them pay off their debt. These programs allow borrowers to pay based off of their household income, as little as 10 percent. Within 20 years, their debt will be paid.

What happens when you default on your student loan?

How You Handle Debt Will Affect Your Credit Score

Debt and credit are closely connected. How you handle your debts can harm your credit rating. While repairing your credit you need to be careful how you handle your debt.

Too much debt is bad but you knew that

A large part of your credit score is based on your credit card debt. Make sure you pay off regularly to stay clear of the limits and you will look like a trustworthy borrower.

Paying late is even worse.

While keeping your debt low the monthly payments are easy to keep under control.When these payments get too high you will have trouble keeping up. Once you miss a month or two you will hurt your credit score and it will be a lot harder to get back on track.

Debt Management

Will the help of a debt relief company help you get rid of your debt? Will they help restore you credit score?

The most certain way to protect your reputation is by making regular payments.

Debt settlement can make you life easier as well since the lender agrees you will pay back less than the total amount. This will lower your credit score as well.

Bankruptcy is really the last choice to get rid of unsecured debts. The damage to your credit score will be long lasting, like 10 years.

As a Co-Signer You Need To Be Careful

First-time borrowers often find it difficult to get a loan. Even if they are not considered a risk due to poor credit rating they are often asked to find a co-signer. This is an easy way for the lender to minimize risk.

As a co-signer you need to be careful. How well do you know the borrower? Are you sure he will be able to make the payments? And in a worst case scenario can you afford the debt if he defaults on the loan?

In a way you are being asked to take a significant risk that a finance company is not willing to take.

If the lender sues to collect, you may end up paying attorneys' fees, and if he wins the suit, your wages could be garnished.
You could even lose your car or you house!

Do you realize that the loan can affect your ability to get financing as well?

You should take adequate measures to protect yourself. At the very least have the lender put in writing that he will advise you of any delays in payements.

Read more at: