With the rise of payday loan borrowing, it has become a question of many that whether or not payday lenders can garnish wages or seize assets if the loans go unpaid.
To make you aware of the fact, yes the lenders can seize assets or start to garnish your wages, if you default on payments!
Payday loans are no different from other forms of debts or credits. It has the same rules, and can apply the same collection methods for unpaid due amounts.
But, let’s get deeper into the discussion, shall we?
When and how will payday lenders garnish wages, and what can you do about it?
First of all, there are two things you should be aware of; one is wage assignment and the other is the wage garnishment.
Both are different in the sense that each has different legal binding.
Wage garnishment is a procedure where a lender approaches civil court, files a lawsuit against the debtor to garnish wages, if the debts go unpaid.
The judgment is then issued where both the court and the lender decide, that since the debtor is not rightfully making debt payments, it’s mandatory that his wages be garnished!
If you are a debtor, then you must be wondering, how come the court and lender is making such an important decision about you, without you even knowing it!!
Say what! You must have either missed the notification or neglected it, when the lender informed you via a letter or mail, that he is going to file a lawsuit against you.
If you failed to appear at the court case, then the lender won by default, and you can do nothing about it, without taking help of lawyers.
On the other hand, wage assignment is an agreement you made with your lender while taking out the loan.
Wage assignment states that if you are unable to pay off the loan or debt, then you are agreeing to the term, and the lender can deduct the payments from your wages.
For this the lender will send a letter to you and your employer that the debt payments are due, so as per the agreement the payment is to be deducted per month from your paycheck.
Wage assignment is an agreement that is signed between the debtor and the creditor when taking out a loan.
So, if you signed for wage assignment while taking out the payday loan, then it is both ethical and legal for the payday loan lender to garnish your wages.
However, you can still opt out of this agreement whenever you want. It’s not that you are forever bound to let your wages be garnished.
In legal terms, to revoke the wage assignment agreement, you will have to send a written request to the lender that you don’t want your wages to be garnished anymore.
Also don’t forget to send a copy of the same to your employer!
Even then if you see that your wages are continuously being garnished, then it’s better you seek some professional help. Consult attorneys and lawyers, and take legal action against the payday lender.
Hope that will definitely work!
How can payday lenders seize assets?
This situation is actually quite tough to explain. But I will try to make it simple.
If you are the debtor, then till you are alive and don’t file bankruptcy (especially Chapter 7), your lenders will not be able to seize assets.
What happens if you file Chapter 7 bankruptcy?
The moment you file Chapter 7, a bankruptcy estate is formed which will include all your non-exempt properties.
Even though bankruptcy is not a favorable condition for creditors (more so for payday lenders, as they deal with unsecured and non-priority debts), but there are still thin chances that your assets can be liquidated by the court to pay the debts off.
And, that’s exactly when the payday lenders will seize your assets indirectly, with a little help from the court.
Then also, you can avoid your assets getting disbursed among creditors and lenders in the game of Chapter 7 bankruptcy. All you have to do is consult with a lawyer and file a no-asset bankruptcy.
Filing a no-asset case is not easy, but also not that difficult. You always have your options if you are intelligent.
What happens if you die with your payday loan debt unpaid?
This is when the whole situation gets tricky.
You might say, what’s the big deal if you die with debts around you, you are freed from your debt liabilities anyway.
Your debts will survive, and that’s exactly when the payday lenders would try to pounce on your assets and bank accounts.
After you die, and if you die intestate (meaning you are not leaving behind any will, that informs about passing your property onto your heirs), then your properties that belong solely to you, will be forming up an estate.
This estate will be having an executioner appointed by the court who will judge which assets can be sold off to compensate the creditors and lenders, whose debts you have not paid while you were alive.
Well, the problem is not with this eventually. It will be a bad situation for your heirs, kids and spouse, if they are entitled to such properties.
That’s all I had to say on this post. I believe this will surely help you to understand what payday loan debt can do to you.
But before we mark the end, let’s summarize the facts and consequences of,
What happens when you default on payday loans, and how to stay safe from the hands of payday lenders:
First and foremost payday loan debt is dangerous.
Payday loan lenders can garnish your wages, as I have stated earlier.
It’s better to pay off the debts as soon as possible, so as not to incur huge interests on the loan balance.
Whenever you receive a letter saying that a lawsuit has been filed against you, and you are summoned to the court, never ignore such mails and respond to it promptly.
If you are absent when the court session is held, then the lender wins the judgment by default, and the court might give the order to garnish your wages.
Always try to pass onto your properties to your rightful heirs, and don’t live this world leaving behind debts.
You can keep your kids’ or spouse’s name on “Pay On Death” papers for savings accounts.
If you don’t do so, then your loved ones will be hassled for your debts after you pass away.
At Least pay off your debts on time for their sake!