Legal Question in Credit and Debt Law in Maryland
Salary ganishment limitations
I have defaulted on a student loan. I am self employed as an independant contractor. One of my contracts received a letter to garnish money paid to me. Is this allowable and what is the percentage allowed and is this after allowing for me paying employer and employee shares of taxes.
1 Answer from Attorneys
Re: Salary ganishment limitations
Yes it is allowed. You signed for the school loan and it must be paid back.
BTW: School loans are very difficult if not impossible to avoid; for example, a Sallie Mae loan cannot be discharged in bankruptcy. I guess about the only way to avoid paying back Sallie Mae is to die with no estate, and then the pre-paid insurance will cover their loss (i.e., that amount that was taken out of your loan proceeds before you received the borrowed amount.) So not only did you borrow money under an agreement that protects the lender/investor in almost all regards under Federal law, but you also were forced to insure this "over protected" loan.
For all these reasons and more, it is my opinion that Sallie Mae school loans are not a wise choice. I personally had Sallie Mae loans which I paid off ASAP. The interest accrual and other factors made these loans particularly distasteful to me. It is my opinion that these loans are overly beneficial to those who purchase them as investments and not entirely fair to the borrowing student. As with most school loans and investments such as 529 plans, read the fine print and become knowledgeable about the product BEFORE buying it...let the buyer beware.
Garnishment for this type of loan falls under Federal Consumer Protection and would be limited accordingly. Garnishment is, with certain exceptions, limited to
25 percent of disposable income. Disposable income is generally defined as that income after paying all legal obligations (i.e., after paying taxes, court decreed alimony or child support, other garnishment orders, etc.).
Hope this helps. If you have any other legal needs, feel free to contact me at (410) 799-9002.