When being threatened with garnishment what are my rights?

First of all try to work out a payment plan that you can live with.  Absent that, these type loans (student loans) almost always have to be paid off to be paid off.  That having been said, there are 2 situations that you may be able to be released from your repayment obligation:  bankruptcy or cancellation of the loan. 

Bankruptcy:  Generally, student loans are not dischargeable in bankruptcy, but it is possible if you can prove that repaying the loan would be a severe hardship for you; a very difficult standard to meet.  Courts consider several factors in making this determination, including:

• your income and expenses
• how long your financial problems are likely to continue, and
• how hard you've tried to repay your debt.

You must file a separate court action in your bankruptcy proceeding supporting your discharge request. You'll probably need an attorney to help you with the procedure.

Cancellation:  In certain limited circumstances, you may be able to cancel your student loan, meaning that you no longer have to pay it.  Doing this is not easy; you'll have to meet specific conditions depending on the type of loan you have.  Often, when you cancel your loan, the government will also reimburse you for payments already made, and help clean up your credit record.  In some situations, you won't be able to cancel the entire loan, but you may be able to get rid of a portion of the loan.  Typically economic hardship or some type of disability would qualify.

Some circumstances qualify you for cancellation only, some for both cancellation and deferment, and still others for deferment only.  The Student Loan Borrower Assistance website at www.studentloanborrowerassistance.org discusses conditions for the cancellation or deferment in more detail and how to apply for such a cancellation.  You can also contact your loan holder or the Federal Student Aid office (800-621-3115 or  http://www.ed.gov/offices/OSFAP/DCS/index.html) to determine if you qualify for cancellation.

If none of this works and your creditor does obtain a judgement and garnishes your wages, AZ follows federal law, which means that no more than 25% of earned but unpaid wages may be seized.