Defaulting a payday loan does not always lead to wage garnishment. What happens if you don’t pay back your debt is another topic. However, one thing is certain that if the lender is recognized by the state, and it wins the legal case to garnish your wage in order to recover the lent money, wage garnishment becomes a reality. In that case, your employer, while obeying the court order, would deduct a percentage of your salary until the debt is completely paid off. There is hardly any way to avoid garnishment order. One can challenge the court order, but hiring a lawyer would cost money. That is why try to pay off your payday loan by the due or make sure your lender is informed if you have trouble making repayments. That way the matter would not come up to wage garnishment. However, if unfortunately, you face a wage garnishment, what percentage of your wage would get deducted?
Once you are noticed that your wages are going to be garnished, you have to be prepared to live with a lowered budget. You need to cut your expenses and compromise with your lifestyle. Therefore, exactly knowing the figure of paycheck deduction would help you prepare better. Since it is a legal process, it is guided by the state and federal laws. Most of that depends on the Consumer Credit Protection Act. According to this act, 25% of your disposable income or 30 times of the federal minimum wage ($7.25/hour)- whichever is lower- can be garnished from your wage.
That means, from the total income the govt. taxes would be subtracted, and then 25% of that would be calculated. Let’s say that your salary is $1,200 per week and $200 is your tax amount (federal and state combined). So your disposable income per week is $1,200-$200= $1,000. Now 25% of $1,000 is $250.
Now, 30 times of the federal minimum wage- which is $7.25/hour- is 30*$7.25= $217.5. Since $217.5 is less than $250, per week the maximum that can be garnished from your wage will be $217.5.
If your wage is being garnished for some other reasons, the amount can be different. In case of bankruptcy, the court might relax or cancel garnishment too. In normal circumstances, though, to help a payday lender recover the debt amount, the deductible amounts from a paycheck can be as mentioned above.
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