Only in America this can happen

[jacko]

As a nation were not to bright. In other industrialized nations, this would not be tolerated.

http://www.valleyadvocate.com/article.cfm?aid=12585

For most defaulted borrowers, a 15% garnishment is a bargain and if only they knew.

[treehugger1]

Jacko, As you know, 15% garnishment is a bargain for me. Until there is a possible change in the bankruptcy laws, I will budget the 15% as part of the cost of my education so many years ago. At least I am fortunate enough to be employed in an area of my graduate degree.

One very large issue with some of the advocacy and change sites is the problem of singling out private loans over federally backed SL's. The bill that some are requesting to be considered by Congress has a focus on private student loans and bankruptcy. As for myself and many others without private SL's, we are unwilling to support a possible bill that will only refer to the private SL's. At the very least, I have requested that my state representatives think about including Federal student loans as a priority debt in a Chapter 13 BK, with any unpaid amounts discharged at the end of five years.

Until I get some relief from the BK laws related to student loans, 15% will remain a bargain.

[jacko]

Its not really 15%, when you factor in tax withholdings and exemptions. A lot of SL borrowers and the defaulters do not realize that the garnishment route is more economical.

I put my BK on hold due to my $30,000 SL(U.S. Federal subsidized) which is on its third year long deferment. Have a 3.5 % interest rate. Also on the hook for $7000 in unpaid HOA's and back taxes. As long as I am unemployed with no health insurance, I do not see the point in filing for now.

The private SL's are subsidized by the Federal gov't if the borrower defaults. That program was such a give away to the banks.

Jacko, As you know, 15% garnishment is a bargain for me. Until there is a possible change in the bankruptcy laws, I will budget the 15% as part of the cost of my education so many years ago. At least I am fortunate enough to be employed in an area of my graduate degree.

One very large issue with some of the advocacy and change sites is the problem of singling out private loans over federally backed SL's. The bill that some are requesting to be considered by Congress has a focus on private student loans and bankruptcy. As for myself and many others without private SL's, we are unwilling to support a possible bill that will only refer to the private SL's. At the very least, I have requested that my state representatives think about including Federal student loans as a priority debt in a Chapter 13 BK, with any unpaid amounts discharged at the end of five years.

Until I get some relief from the BK laws related to student loans, 15% will remain a bargain.

[ryan]

Is 15% the standard garnishment for unpaid student loans?... regardless, of the state you're in?

[treehugger1]

Ryan, I want to reply to this carefully. I can only speak to my case where all of my debt was subsidized and guaranteed. I had no so-called private student loans. The maximum garnishment is fixed at 15%. Such garnishment does not require a court order. It can become immediately effective upon default. Official default in my case, and in most cases, occurs after 270 days of non-payment. I kept calling my guarantor telling them to garnish my wages at about day 200. It took the guarantor about 410 days to finally get the administrative garnishment. What I discovered in the process is that I was certainly not alone when requesting that they garnish my wages, but I did have to beg them to do so. It is not something they generally like to do, but eventually I gave them no choice. I think they get this request more often these days. There appear to be some regulations related to the SL collection process before they can immediately jump to wage garnishment, hence the delay. When it was all said and done, and they added on some collection costs, etc under the law, my loans went from the mid-70K range to the 90K range. I still think this is a bargain (In my case.)

Up until a month ago, they continued to call my cell phone several times per week. I finally contacted them with a cease-and-desist communications request and they complied. In Oregon, original creditors have to abide by many of the rules for CA's under the federal FDCPA. They are still a creditor. Outside of the garnishment, I never hear from anyone.

[treehugger1]

While we are on this subject... I just spoke to some colleagues of mine related to SL's. A couple of them suggested that the guarantors may have as much trouble with original loan documents as the mortgage industry is having. Interesting. I'll use my example: I went to undergraduate school and had student loans, many of them from different lenders who were part of the subsidized SL system. After completion, I had the loans consolidated. I made a few payments and then attended graduate school for 3 years. I took on more student loans, but now in a different state with a new set of lenders. After graduate school, all of my loans were consolidated. I made very little money for years, so I kept getting deferrment (or whatever they called it) and interest kept growing. At some point in time, I received something in the mail about getting into a new consolidation program with a 30 year plan. This gurantor was 3000 miles away on the East Coast. Wachovia assumed the loans. A year or so later, the loans were in some higher education assistance corporation (guarantor) in a different state with a different lender. About three years ago, I was notified that my GSL consolidation was now being held by some educational assistance office in Pennsylvania, of all places. The only written documentation that I have are the original notes that I signed. These go back as long as 23 years ago and are from the original lenders who were a part of the Stafford Loan GSL program. (Yes, I am a dinosaur.) The best consolidation rate I ever received was 8.25%. This should tell many of you how old my loans are. By the way, my loans were not obtained in an era that satisfies the "new" lower consolidation rates. Tens-of-Thousands of other boomers are in the same situation.
This is the same reason why many of the "government" payback programs only work for a few students who qualify by specific dates set up in the payback programs.

Sorry, I digress. After speaking with a few collegues and friends, they believe I should challenge the garnishment. They said it is not too late to challenge the garnishment. One basis for challenging is that the debt is not correct. They believe it could take months or years for the Dept of Education and guarantor to sort out what is owed, and who owes and is responsible for what amounts on which contracts. I believe there is a strong likelihood that my student loans were swapped and sold and traded by lenders in the GSL programs for years. Who knows what the real chain of custody was before it all went to Wachovia and on to newer guarantee agencies 3000 miles away. For many of us, GSL's were financed by private banks, but the loans are not private loans. The loans were subsidized and guaranteed by the Feds. I now wonder if some of these older GSL debts were traded and swapped in portfolios just as other unsecured debt was. Perhaps the the guarantors also played a role.

I don't have time to pursue this, but it does seem interesting!

[backtoschool]

While we are on this subject... I just spoke to some colleagues of mine related to SL's. A couple of them suggested that the guarantors may have as much trouble with original loan documents as the mortgage industry is having. Interesting. I'll use my example: I went to undergraduate school and had student loans, many of them from different lenders who were part of the subsidized SL system. After completion, I had the loans consolidated. I made a few payments and then attended graduate school for 3 years. I took on more student loans, but now in a different state with a new set of lenders. After graduate school, all of my loans were consolidated. I made very little money for years, so I kept getting deferrment (or whatever they called it) and interest kept growing. At some point in time, I received something in the mail about getting into a new consolidation program with a 30 year plan. This gurantor was 3000 miles away on the East Coast. Wachovia assumed the loans. A year or so later, the loans were in some higher education assistance corporation (guarantor) in a different state with a different lender. About three years ago, I was notified that my GSL consolidation was now being held by some educational assistance office in Pennsylvania, of all places. The only written documentation that I have are the original notes that I signed. These go back as long as 23 years ago and are from the original lenders who were a part of the Stafford Loan GSL program. (Yes, I am a dinosaur.) The best consolidation rate I ever received was 8.25%. This should tell many of you how old my loans are. By the way, my loans were not obtained in an era that satisfies the "new" lower consolidation rates. Tens-of-Thousands of other boomers are in the same situation.
This is the same reason why many of the "government" payback programs only work for a few students who qualify by specific dates set up in the payback programs.

Sorry, I digress. After speaking with a few collegues and friends, they believe I should challenge the garnishment. They said it is not too late to challenge the garnishment. One basis for challenging is that the debt is not correct. They believe it could take months or years for the Dept of Education and guarantor to sort out what is owed, and who owes and is responsible for what amounts on which contracts. I believe there is a strong likelihood that my student loans were swapped and sold and traded by lenders in the GSL programs for years. Who knows what the real chain of custody was before it all went to Wachovia and on to newer guarantee agencies 3000 miles away. For many of us, GSL's were financed by private banks, but the loans are not private loans. The loans were subsidized and guaranteed by the Feds. I now wonder if some of these older GSL debts were traded and swapped in portfolios just as other unsecured debt was. Perhaps the the guarantors also played a role.

I don't have time to pursue this, but it does seem interesting!

Actually treehugger1, I tried something similar when I consolidated my student loans. I went to undergrad in one state, graduate school in another state, and then moved to Europe and worked there for 3 years where I let all of my loans go into default. When I got back, I moved to yet another state. It took months to consolidate all my loans into one direct loan, and the collector didn't even do it right and left some out and I ended up having to consolidate twice.

I fought the second set of loans that were "forgotten" the first time, saying that it was not my fault they were forgotten, and that if the federal government could not even find their own loans, why should I have to have the debt added to my consolidated loan burden? My loans had all been traded and swapped numerous times and some were from banks and backed by the government while some were direct loans. The government did not listen to my plea obviously, but I was able to get rid of some of the interest and collection fees that had accrued on the "lost" loans.

What was interesting to me, was how eventually, all the loan documents were found and put in my central government loan records. Some of the paperwork had changed hands like ten times. It took almost six months for them to sort it out, and fighting it didn't really buy me anything, but I would love to see someone try fighting something like this and win.

[catleg]

The biggest difference between student loans and mortgages is MERS. Supposedly, MERS required the destruction of the original documents.

Now as far as the student loan paperwork, is it possible they have it on "tape" (microfile, some other media) rather than the original contract with "wet" signature? Can you challenge the introduction of a copy in court, demand to see the original?

[MSbklawyer]

Here's something to think about for anyone who is about to be garnished for student loans. Now, follow me here because this gets complicated: Even student loans are subject to the 25% garnishment limit. If someone else is already garnishing your wages at this 25% maximum limit, then student loans would have to get in line behind that creditor. Now, suppose further that the creditor in line ahead of the student loan people is your spouse. See, given your well-known propensity to go out and drink, gamble, and chase less-than-reputable members of the opposite sex, your whole paycheck every week is completely gone even before the groceries are bought. As a result, your loving and faithful spouse and your darling children are in clear and present danger of becoming destitute, and thus, a charge on the public treasury. So what can be done to prevent this 'disease' of yours from bringing your family to ruin? Well, every state has some sort of domestic and child support or conservatorship law that can attach your wages to force you to provide for your family by garnishing your paycheck -- up to 60%!! Now, suppose your loving and faithful spouse used these laws to sue you (for your own and your family's good of course) for the domestic and child support and, in a rare fit of sobriety and sanity, you swore to give up your drinking, gambling, skirt-chasing ways and confessed the judgment. Then, since you immediately forgot your oath and went back to your old ways, your loving and faithful spouse issued a writ of garnishment (again, for your own and your family's good) to your employer which took (enitrely coincidentally) the 25% maximum from your paycheck -- hell, he/she took 50% -- why stop at 25 when she could take 60?

Comes now Mr. Student Loan creditor with an administrative writ of garnishment proposing to attach 15% of your wages. In another rare fit of sanity and lucidity, you contest the garnishment and point out to the judicial official that your wages are already being garnished in excess of 25% and that, therefore, the student loan garnishment, while valid, will have to get in line behind your spousal/child support obligation which would be expected to end at about the time your spouse dies, or you do, or you are cured of this terrible 'disease', whichever should occur first.

You would go to your grave owing this student loan debt -- but you were going to anyway because there was no way in hell you were ever going to make enough money in two lifetimes to pay back a half-million dollar student loan debt and feed yourself and your family. And, as it turns out, in yet another rare fit of sanity and sobriety, you had the good sense to structure your affairs with a good estate planning lawyer so those poor, pitiful children that you neglected so miserably during your living years got all of your assets through an inter vivos trust or a life-estate arrangement, so that there was nothing in your estate for the evil, greedy student loan b******s to take.

It would be an absolute shame though, for someone to be so unfortunate enough that his/her own spouse and children had to sue him or her to force them to do even their most fundamental duty. And it would be doubly unfortunate if the evil, greedy student loan b******s got shafted because of it. I truly hope this never happens to any of you.

[keepinitreal]

Thanks MSbkLawyer! Something to remember in the future (in case my spouse needs paycheck garnishing).

[treehugger1]

Great post MSBKlawyer! Of course I have done just the opposite. I love the 15% SL garnishment as the "others" must fight over the remaining 10%. I hope I don't sound like a sociopath. I'm just following the statutes of my fine state.

I have heard of folks confessing judgment for a debt owed a friend, family member, or spouse. And, your discussion gets around the 90 day writ rule that is part of my state garnishment laws.

Speaking of student loans, a few months ago I heard of a local debtor who used his CC's for piles of cash advances, and then used the cash advances to pay off his SLs. After a year or so, the gentleman declared a BK 7. My understanding was that there were some questions raised, but in the end, there was little anyone could do about the unsecured CC debt that was acquired to pay off the SL. I'm going to guess that this may happen more than I think. I never thought of it.

It does seem clear to me that I will go to my grave with a pile of SL debt. I appreciate the thoughts related to what to do with any assets to protect them for my family.

[MSbklawyer]

Great post MSBKlawyer! I have heard of folks confessing judgment for a debt owed a friend, family member, or spouse. And, your discussion gets around the 90 day writ rule that is part of my state garnishment laws..

Thank you. The beauty of it is that the duty to support your spouse and children is a real and bona fide obligation. It's not like you are confessing judgment to some contrived or fictitious debt to your best friend. It's real; and if your spouse elects to get his/her and your chidrens' support out of you through the legal process instead of you giving it up voluntarily; and if you go along with the arrangement, who can complain?

Of course you must have a spouse and/or children for this to work.

[backtoschool]

Here's something to think about for anyone who is about to be garnished for student loans. Now, follow me here because this gets complicated: Even student loans are subject to the 25% garnishment limit. If someone else is already garnishing your wages at this 25% maximum limit, then student loans would have to get in line behind that creditor. Now, suppose further that the creditor in line ahead of the student loan people is your spouse. See, given your well-known propensity to go out and drink, gamble, and chase less-than-reputable members of the opposite sex, your whole paycheck every week is completely gone even before the groceries are bought. As a result, your loving and faithful spouse and your darling children are in clear and present danger of becoming destitute, and thus, a charge on the public treasury. So what can be done to prevent this 'disease' of yours from bringing your family to ruin? Well, every state has some sort of domestic and child support or conservatorship law that can attach your wages to force you to provide for your family by garnishing your paycheck -- up to 60%!! Now, suppose your loving and faithful spouse used these laws to sue you (for your own and your family's good of course) for the domestic and child support and, in a rare fit of sobriety and sanity, you swore to give up your drinking, gambling, skirt-chasing ways and confessed the judgment. Then, since you immediately forgot your oath and went back to your old ways, your loving and faithful spouse issued a writ of garnishment (again, for your own and your family's good) to your employer which took (enitrely coincidentally) the 25% maximum from your paycheck -- hell, he/she took 50% -- why stop at 25 when she could take 60?

Comes now Mr. Student Loan creditor with an administrative writ of garnishment proposing to attach 15% of your wages. In another rare fit of sanity and lucidity, you contest the garnishment and point out to the judicial official that your wages are already being garnished in excess of 25% and that, therefore, the student loan garnishment, while valid, will have to get in line behind your spousal/child support obligation which would be expected to end at about the time your spouse dies, or you do, or you are cured of this terrible 'disease', whichever should occur first.

You would go to your grave owing this student loan debt -- but you were going to anyway because there was no way in hell you were ever going to make enough money in two lifetimes to pay back a half-million dollar student loan debt and feed yourself and your family. And, as it turns out, in yet another rare fit of sanity and sobriety, you had the good sense to structure your affairs with a good estate planning lawyer so those poor, pitiful children that you neglected so miserably during your living years got all of your assets through an inter vivos trust or a life-estate arrangement, so that there was nothing in your estate for the evil, greedy student loan b******s to take.

It would be an absolute shame though, for someone to be so unfortunate enough that his/her own spouse and children had to sue him or her to force them to do even their most fundamental duty. And it would be doubly unfortunate if the evil, greedy student loan b******s got shafted because of it. I truly hope this never happens to any of you.

This is hilarious. But why stop at spouses? I tend to go through periods of neglecting myself financially. I want to sue myself to make sure I provide for myself properly, and I want to get a writ of garnishment against my own future wages.

[treehugger1]

MSBK, Was Mark Twain a relative of yours?

[keepinitreal]

This is hilarious. But why stop at spouses? I tend to go through periods of neglecting myself financially. I want to sue myself to make sure I provide for myself properly, and I want to get a writ of garnishment against my own future wages.

first you could marry yourself (like this lady) and then you could still garnish your spouse's wages lol.