I have been getting a lot of calls and emails lately about student loan debt. Perhaps with the economy in recession, student loan creditors are becoming more hard line about collecting, and student loan debtors have good reason to be worried.
Federal government involvement in the student loan business means that collection resources not available to regular creditors come into play. There is one statute that permits student loan creditors to garnish wages without the need to first go to court. Student loan claims can also offset tax refunds.
Blog reader Janet describes an all too common scenario as follows:
I am unemployed and have defaulted student loans. I was married last April and my husband’s tax return was offset as a lovely wedding gift. I am researching how to file for bankruptcy for my other debts and also looking into how to prove “undue hardship” regarding the student loans.
In the meantime, we were curious about whether or not my husband’s wages could be garnished? Since I am unemployed, this would devastate us.
Also, once I get a job, if they are garnishing my husband’s wages, would they be able to garnish mine as well — at the same time?
Here is my response: as noted above, student loan creditors can seize tax refunds and garnish wages. If Janet gets a job, she would also be subject to wage garnishment. There is no law that prevents both spouses in a marriage from being subjected to wage garnishment simultaneously.
I also would not get my hopes up too much about a hardship discharge of student loans in bankruptcy. As noted in my March 3, 2009 post, student loan hardship discharges are very difficult to get.
This is a situation where Janet and her husband need to redouble their efforts to get their student loans paid off or back into a liveable payment plan. Bankruptcy and consumer protection law offer very little in the way of relief.