If you’ve fallen behind on federal student loans, and you are working at a job, administrative wage garnishment (AWG) of your earnings may be looming.
Once AWG is in the picture, there are three basic ways of dealing with it.
First, avoid it if possible. If you can prevent the garnishment from going into effect in the first place, half the battle is already won. In order to put a AWG garnishment into place, the Department of Education must first send you a 30 day warning letter by snail mail. Don’t ignore it! Action taken during the 30 days, such as negotiation with the debt collector handling your account, or requesting a hearing on the AWG, can at least buy you some breathing room.
If you are too late with the avoidance strategy, and you are already being garnished, the second option, rehabilitation of your loan is the principal escape route. Rehabilitation involves a short application, and then making five consecutive good faith monthly payments on the loan. It’s not immediate relief, but it’s a five month relief.
One trick of the trade is that the amount of the payments can be negotiated prior to entering the rehab agreement so your debt load is managable.
The third arrow in your quiver is to file a bankruptcy case. Can’t stand being garnished for five more months while rehabbing your loan? Bankruptcy terminates the AWG immediately.
Of course, bankruptcies come with a lot of extra consequences, Whether it is the right move for any given person is a case by case decision. Generally speaking, the more financial problems you have, the more attractive it becomes. So if the AWG is the biggest thing bothering you, bankruptcy may be too big a weapon for the problem. But for a person behind on a mortgage,credit cards, etc. it may indeed be the preferred solution.