One consequence for defaulting on a loan is to have your wages garnished. What does this mean?

Wage garnishment is a legal process where a portion of a person's earnings is withheld by their employer to pay off a debt. When an individual defaults on a loan, the lender may seek a court order allowing them to take a portion of the borrower's wages directly from their paycheck. This typically occurs after the lender has made attempts to collect the debt through other means, such as calls or letters, and the borrower still fails to make payments.

The amount that can be garnished depends on various factors, including the type of debt and state laws. Generally, a creditor can garnish a certain percentage of disposable income, which is the amount left after mandatory deductions, such as taxes and Social Security. Wage garnishment can affect the borrower's financial situation significantly, leading to additional stress and financial instability. It's essential for individuals facing potential garnishment to be aware of their rights and seek financial advice.