Why the Automatic Stay Prevents Wage Garnishment

Say an employee's non reusable earnings are $2,000.

No. Under Title III of the Customer Credit Protection Act (CCPA), you can not release a staff member whose revenues go through garnishment Nevertheless, the CCPA does not safeguard workers whose revenues go through two or more garnishments. You must begin garnishing a staff member's incomes when you receive a trainee loan garnishment order.

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Stop withholding if you receive an official notice. You can easily establish a wage garnishment in Patriot's payroll software. Bear in mind that you are accountable for remitting garnishments to the appropriate firms. You can learn how to establish a wage garnishment here.

Why the Automatic Stay Prevents Wage Garnishment

The U.S. Department of Education (the Department) today revealed that it will delay the execution of uncontrolled collections on federal trainee loans, consisting of Administrative Wage Garnishment (AWG) and the Treasury Offset Program (TOP). The short-lived delay will enable the Department to implement significant trainee loan repayment reforms under the Working Households Tax Cuts Act (the Act) to provide customers more options to repay their loans.

The Act decreases the variety of federal trainee loan repayment plans, getting rid of a complicated labyrinth of options and making it much easier for customers to choose either a single standard repayment plan or income-driven repayment (IDR) strategy that best meets their requirements. This includes a new IDR plan that waives overdue interest for debtors with on-time payments whose payments do not totally cover accrued interest, which consists of small matching payments from the Department in particular situations to guarantee that exceptional principal is minimized monthly.

The delay in collections will offer defaulted debtors additional time to evaluate these new repayment alternatives once they consolidate their loans or complete a repayment or rehab arrangement. The Act likewise provides debtors a 2nd chance to rehabilitate a defaulted loan, enabling them to get their repayments back on track and get the loan out of default.

The hold-up in collections will provide defaulted customers additional time to start the rehab procedure, including the ability to restore their loan a 2nd time. "After the Biden Administration misled debtors into believing their trainee loans would not need to be paid back, the Trump Administration is dedicated to helping student and parent customers resume regular, on-time repayment, with more clear and budget friendly alternatives, which will support a more powerful financial future for customers and enhance the long-term health of the federal student loan portfolio," "The Department determined that involuntary collection efforts such as Administrative Wage Garnishment and the Treasury Offset Program will work more effectively and relatively after the Trump Administration implements considerable enhancements to our damaged student loan system." Throughout the delay, the Department encourages debtors in default to explore their options for fixing their defaulted trainee loans with the defaulted federal loan servicer.

The Trump administration will resume garnishing earnings from student loan customers in default in early 2026, the U.S. Education Department validated to NPR. The move follows a years-long time out in wage garnishment due to the pandemic. "We expect the first notices to be sent to roughly 1,000 defaulted customers the week of January 7," a department spokesperson told NPR.

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A borrower is in default when they have not made loan payments in more than 270 days. When that occurs, the federal government can attempt to collect on the debt by taking tax refunds and Social Security advantages, and also by purchasing an employer to withhold approximately 15% of a debtor's pay.

Betsy Mayotte, the president and creator of The Institute of Trainee Loan Advisors, says even though borrowers have actually expected this, the timing is regrettable. "It will accompany the boost in healthcare costs for a lot of these defaulted debtors," she stated, describing the premium increases for Affordable Care Act health insurance coverage that begin in 2026.

Another 3.7 million are more than 270 days late on their payments and 2.7 million are in the early stages of delinquency. "We've got about 12 million debtors right now who are either delinquent on their loans or in default," Preston Cooper, who studies student loan policy at AEI, told NPR.

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Cory Turner contributed to this story.

(Post Updated Jan. 6 and 8, 2026) This article lists federal and state customer law changes arranged to enter into result or expire during the period from December 1, 2025, through January 1, 2027. Other consumer law changes will be enacted in 2026 and will go into impact in 2026; this article notes modifications whose effective dates have already been arranged as of December 31, 2025.