Bankruptcy and Student Loans – Can Chapter 13 Stop a Student Loan Garnishment

You can stop a student loan garnishment in a Chapter 13 if you plan on paying the entire student loan through your Chapter 13 plan.  With few exceptions, student loans cannot be wiped out in a Chapter 13 or a Chapter 7 bankruptcy.

In addition to being protected from being wiped out in bankruptcy, the student loan creditor can garnish your wages without having to file suit against you.  They can send a letter to the payroll department of your employer that may read something like this,

Pursuant to authority granted to XYZ Student Loan Corporation by Federal Law (20 U.S.C. 1095a; 34 C.F.R. section 682.410(b)(9), you, the employer of a student loan borrower are hereby ordered to withhold wages from the employee’s disposable pay.  The Federal Law expressly preempts all state laws governing garnishment of wages.

The letter will also most likely contain a warning to your employer that may read something like this,

If you the employer fail to comply with this Order, pursuant to 20 U.S.C. 1095(a)(6), XYZ Student Loan Corporation may sue you the employer in state or federal court to recover from you the employer any amount that you the employer failed to withhold, as well as attorney fees, litigation costs, and at the court’s discretion, punitive damages.”

This is not the kind of letter that your employer would like to receive.

Call me today at 706-295-0030 for your free consultation so we can review your entire economic picture and see if we can come up with a plan that works for you.  We are a debt relief agency that helps people obtain relief from their creditors by filing bankruptcy.

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