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Can Debt Consolidation Stop Wage Garnishment?

Debt consolidation loans can be helpful financial tools. To stop wage garnishment, however, other strategies may be required.

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By Devon Delfino

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Devon Delfino

Freelance writer

Devon Delfino is a personal finance writer with over eight years of experience. Her work has been published by U.S. News & World Report, CNN, and The Motley Fool.

Edited by Jared Hughes

Written by

Jared Hughes

Writer and editor

Jared Hughes has spent more than eight years covering personal finance, with bylines at the New York Post and NewsBreak.

Reviewed by Meredith Mangan
Meredith Mangan

Written by

Meredith Mangan

Senior editor

Meredith Mangan is a senior editor and expert on personal loans.

Updated November 5, 2024

Editorial disclosure: Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”

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Wage garnishment is a legal process where some of your wages are diverted to pay off a debt. That can be a really difficult situation to be in. One option to get out of wage garnishment is getting a debt consolidation loan. 

But for most, it’s not going to be available due to its credit and income requirements. However, there are other ways to stop wage garnishment, including negotiating with your creditors or entering into a debt repayment agreement.

What is wage garnishment and how does it work?

Wage garnishment is a legal process wherein a person’s earned wages are withheld by an employer, per a court order, and sent directly to a creditor. 

Wage garnishment can happen when someone falls behind on payments and then has a debt, such as a credit card or tax bill, that’s in collections. Before wage garnishment can occur, there is a distinct process that begins once you fall behind on your payments.

“Wage garnishment happens when you get sued by a creditor, you lose the lawsuit, and you get a judgment against you. To be sued, your debt would need to be delinquent,” said Leslie Tayne, a financial attorney based in New York. “Some states have limitations on wage garnishment.”

There’s also a federal limit to how much of your income can be garnished. Due to the Consumer Credit Protection Act, most wage garnishment is limited to the lesser of either 25% of your disposable income or “the amount by which an employee’s disposable earnings are greater than 30 times the federal minimum wage.” 

However, there is an exception to these limits for certain types of debt, including some bankruptcy court orders, as well as federal or state tax debts.Either way, having a portion of your income taken away can have tremendous consequences for your finances. 

For example, if you’re already behind on multiple payments, it can cause your debt to snowball, and even for more debts to go to collections and potentially have legal action (such as wage garnishment) taken. 

So, stopping wage garnishment as soon as possible is essential. Fortunately, there are actions you can take, such as debt consolidation.

Can debt consolidation stop wage garnishment?

Yes, in some cases, a debt consolidation loan can stop wage garnishment. A debt consolidation loan is a type of personal loan that combines existing debts into a new loan with its own terms. 

Your loan funds are then used to pay off debts, and you only have to make one payment to your new lender. These products are often used to get better terms, such as lower interest rates or more affordable monthly payments.

It’s also vital to make sure that the funds are disbursed in a timely manner. 

That’s because many times wage garnishment comes with an interest rate (often ranging from 2% to 18%) — so waiting to apply, or to get the funds, can mean your borrowed amount isn’t enough to cover the full costs. 

That means you could still experience wage garnishment if there’s a leftover balance. So it can help to look for lenders that have quick loan approval and funding times.

However, there is a significant catch here since it’s difficult to qualify for these loans once you have a debt that’s resulted in wage garnishment.

Related: How Long Does It Take to Get a Personal Loan?

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