If I have a unpaid loan and am now getting collection calls, will I get my earnings garnished?

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If I have a unpaid loan and am now getting collection calls, will I get my earnings garnished?

I had took out a loan from a payday loan office. Up until now I haven’t been able to pay for it.

Asked on March 23, 2011 under Bankruptcy Law, California

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

Check to see if it is legal for this company to do business in CA or if any of your rights have been violated. For further information go to: http://www.inlandlegal.org/publications/consumer/ENGLISH_Pay_Day_Loans_Brochure.pdf.  If this is a valid debt, your creditor can go to court and win a judgment.  If that happens, then your non-exempt assets are at risk.  This includes a portion of your wages as allowed by state law. Under both CA and federal law, creditors cannot collect more than 25% of a debtor's disposable earnings.  Additionally, CA creates an another exemption by permitting employees to declare a greater portion of disposable earnings if they need extra funds to cover basic living expenses. This exemption is permitted as long as the debt was not incurred from previous living expenses or is the result of delinquent child support or alimony payments.  Finally, there also a limitation on garnishment. The debtor's disposable income after garnishment must be equal to or more than 30 times the federal minimum wage. So if the debtor doesn't have at least 30 times this wage for disposable earnings after garnishment, the full 25% permitted by law cannot be taken.

Note: Until a judgement is obtained in court, there can be no garnishment. And you should receive notice of the court proceedings first so that you can appear and offer a defense, if you have.

MD, Member, California Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

You need to immediately contact your state's department of banking and find out if it is legal for this company to do business in your state and if it is licensed to conduct such activity. If it is not, you may have an out on paying and point to the state statute to the collection agency. You may even be better served by filing a written dispute with the credit reporting agencies on this matter by showing the statute, the fact (if it is true this company is not licensed to do such business in your state) they are not licensed and the collection agency contact information to help get this off of your credit report before any suit is filed. Never ever concur and agree or confirm you owe this debt when such an agency calls because you don't know if the statute of limitations has run and you don't know if you actually owe the debt. If the statute of limitations has run and you confirm or affirm the debt, the time period to sue begins all over again.


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