When the Federal Government Is Your Creditor
If you owe too much federal government debt, you may have found out the hard way how it can impact all areas of your life.
Federal debt works differently from some other kinds of debt. Instead of a normal creditor, which can be frustrating enough, this creditor has the power of a massive world superpower behind them.
Fortunately, if you’re struggling to pay federal student loans, taxes, or other government debt, you do have options.
Wage Garnishment and Federal Debt
Most commonly, federal debt includes tax debt and student loans. On a state level, it might include child support and alimony, taxes and fees, and more.
And just like with most other kinds of debt, government debt can lead to wage garnishment.
In a wage garnishment, your creditor gets permission from the court to take a percentage of your wages out of your paycheck before it ever gets to you. If they get approval, your employer doesn’t have a choice: they have to take the money from you, no matter what.
Wage garnishment is a huge issue that can really hurt your daily life, let alone your plans for the future.
But with federal debt, it actually gets worse. The federal government has control over other aspects of our lives, too. And they can come after those as well. So not only might they garnish your wages—they can also take away other federal benefits, like the child tax credit and Social Security.
Illegal Wage Garnishment by the Government
Regulators recently discovered the government actually garnished wages illegally during the pandemic.
Student loan borrowers reported the Department of Education illegally garnished their wages during the Covid-19 payment moratorium. During that difficult time of economic uncertainty, the public loan companies told people they didn’t have to pay down their debt. Then, as millions of people lost work and suffered from the virus, the Department of Education took money from paychecks despite the promise they wouldn’t.
Once this all became public, and after serious outcry, the government claims they refunded the money. But for some people, it was too little too late. Wage garnishment can put people in real financial trouble, and some borrowers lost their homes and cars and fell deeper into debt.
Solutions for Federal Government Debt
To stop wage garnishment for most debts, you can file bankruptcy. Bankruptcy puts a court-ordered hold on all garnishments, so the misery of losing your paycheck finally ends.
For tax debt, federal bankruptcy laws allow you to include what you owe in a bankruptcy. This means depending on your situation, you can either get rid of the debt completely or pay it through a simple payment plan designed around your income.
Student loans work a little differently. You can’t get rid of the debt, per se, but you can include them in a Chapter 13 bankruptcy. This helps you get out of the debt, protects your assets, and gives you better control over your finances.
Get Answers From a Memphis Bankruptcy Lawyer
If you owe the government money you can’t pay, don’t wait to figure out your options. Our firm offers free consultations to help you decide whether bankruptcy is the right choice for you. We’ll help you answer questions like:
- Do I qualify for bankruptcy?
- What can I do about tax debt?
- Can I include my student loans?
- and more
The conversation is completely free, no strings attached. Our goal is to help the people of Memphis live a life free of debt, and we’re happy to help you as you start that process.
Give us a call today at 901-327-2100 or fill out the form below for more info. We look forward to talking with you!