Can Payday Loans Garnish Your Wages?
Written by
Jeanine Skowronski
Edited by
Melanie Grafil
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A payday lender can only garnish your wages after suing you in civil court and winning a judgment. This legal process takes time — and you often can avoid a payday loan wage garnishment by taking proactive steps before your court date.
For instance, you can request an extended repayment plan, redraft your budget to pay off your balance, tap a debt consolidation loan or seek credit counseling.
Learn more about your rights and how to avoid wage garnishments due to outstanding payday loans.
What Is Wage Garnishment?
Wage garnishment is effectively a court-ordered lien on your paycheck, directing employers to withhold and send part of your earnings to a third party. They’re used to collect unpaid debts, like child support arrears, back taxes and outstanding loan balances — including those owed to payday lenders.
Wage Garnishment Limit
Federal law limits creditor wage garnishments to 25% of your take-home pay, or 30 times the federal minimum wage, whichever is less.
Can a Payday Lender Garnish Your Wages Without Warning?
Wage garnishments by creditors require a civil court judgment, meaning a payday lender can’t pull money from your paycheck without warning. In fact, they’ll have to file a lawsuit against you — and that requires advance written notice, along with a timed opportunity to respond, usually 20 to 30 days.
The lender must then win its lawsuit and secure a judgment to garnish your paycheck. Timelines for court cases vary, but if the judge finds in the lender’s favor, you typically have another five to 30 days before the wage garnishment goes into effect.
Keep in mind that ignoring a lawsuit and its associated court notice can result in a default judgment against you.
What Happens If You Don’t Pay Back a Payday Loan?
Typically, lawsuits –and wage garnishments, as a result –are the last step in a long process taken to recoup an unpaid debt. If your payday loan goes into default, you could face the following:
- You’ll accrue interest and fees, and, given the type of financing, those costs are likely high. Payday lenders typically charge the equivalent of a 390% annual percentage rate (APR) or more, and loans in default may incur late, non-sufficient funds and returned payment fees.
- Your loan could be sent to a debt collector. Lenders often send debts to third-party collectors when balances go unpaid for a lengthy period, usually 90 to 180 days.
- You may get collection calls, letters, or emails from the payday lender or the third-party agency seeking to recoup the money, though there are certain things a debt collector can’t do when contacting you.
- You may face a lawsuit if the lender feels it must secure a judgment and subsequent wage garnishment to get its money.
3 Things You Can Do if You Miss a Payday Loan Payment:
“Thankfully, payday loans are typically small, just a few hundred dollars,” said Erica Sandberg, consumer finance expert at BadCredit.org, so “in general, lenders do not want to take you to court for such minor sums, and attaching a person’s wages is a laborious and lengthy process.”
If you’re behind on payday loan payments, the following steps can help you avoid a judgment and wage garnishment.
1. Contact the Lender
Contact the lender and disclose your inability to pay to avoid a missed payday loan payment. The lender may agree to move your due date or put you on an extended repayment plan (EPP).
“Some payday lenders are amenable to hardship programs that can help you deal with the situation without it becoming a worse problem,” Sandberg said.
2. Avoid Opening a New Payday Loan
New high-interest debt is only likely to exacerbate your situation. Avoid the payday loan debt cycle by borrowing from friends or family members, tapping a side hustle with an immediate payout, or seeking credit counseling.
3. Know Your Rights
Review your state’s consumer protection laws. Some states prohibit payday lending through interest rate caps or other restrictions, while a few don’t allow wage garnishment for payday loan debt collection.
It’s also important to note that you can’t get arrested for unpaid payday loans, and it’s illegal for a payday lender to threaten you with jail time.
How To Get Out of Payday Loan Debt Without Going to Court
Fortunately, there are steps you can take if you’re falling behind on a payday loan that can preclude a court case.
Draft a Payment Plan
“Lenders will not take you to court or send the debt to collections if you pay it off,” Sandberg said. “Revisit your budget and make critical changes so that you can pay.”
If you can’t find money in your budget immediately, see if the lender will offer an EPP.
Work With a Credit Counselor
Find a reputable non-profit credit counseling agency. They help overwhelmed borrowers understand the full scope of their liabilities, draft a new budget and improve long-term financial wellness for low-to-no fees.
They also negotiate and set up debt management repayment plans (DMPs). A DMP consolidates multiple debts into one monthly payment at a more favorable interest rate.
Consider a Debt Consolidation Loan
Alternatively, consider applying for a debt consolidation loan, which provides a lump sum at a competitive interest rate you can use to pay off multiple high-interest balances. Start your search with these top debt consolidation lenders.
Protect Your Bank Account
Federal law also prohibits payday lenders from garnishing your bank account without suing and obtaining a judgment.
To prevent unauthorized withdrawals, do the following:
- Ask your bank or credit union to block payments
- Issue a stop payment order
- Keep a close eye on your accounts
- In extreme cases, consider closing your bank account.
Unauthorized payday loan withdrawals can result in non-sufficient funds or returned payment fees that drive up the total cost of your debt.
Tips to Avoid Wage Garnishment From a Payday Loan
If you receive summons from a payday lender, these steps can spare you from wage garnishment.
- Never ignore the legal notice. Instead, use the time between receiving a summons and your court date to pay off or settle the debt in question.
- Show up to court, even if you can’t pay the debt right away, as failure to appear typically results in a default judgment for the lender — and wage garnishment within five to 30 days, depending on state law.
- Try to settle with the lender before your court date using the aforementioned tactics or other fast debt repayment strategies. For instance, see if they’ll accept partial payment to drop the lawsuit.
- Save copies of all agreements and payment records. That way, the lender can’t renege on any negotiated repayment plans. Or, if it tries to sue after the fact, you’ll have documented evidence to avoid a judgment.
FAQs About Payday Loans and Wage Garnishment
Here are more answers to your questions about payday loans and wage garnishment.- Can payday lenders garnish wages without going to court?
- No. A payday lender must sue and successfully secure a court judgment against you before garnishing wages. It can't automatically withdraw funds from your paycheck.
- Can a payday lender freeze my bank account?
- A payday lender can garnish your bank account only after suing and securing a judgment against you. Bank garnishments require a financial institution to withhold and send a certain amount of money to a third party, like a payday lender or debt collector.
- Will wage garnishment affect my job?
- Federal law prohibits employers from terminating an employee based on a wage garnishment for a singular debt. However, it doesn't offer the same protections when you have multiple wage garnishments.
- How can I stop a wage garnishment once it starts?
- You can stop a wage garnishment by paying the debt in full, appealing the court judgment or filing for bankruptcy. You can also seek exemptions for certain wages, including Social Security, Veteran's and disability benefits.
- Can payday loans take Social Security or disability income?
- Federal law protects some wages, including Social Security benefits and disability income, from wage garnishment. However, protection isn't absolute. It's limited to two months' worth of benefits at a time. It's also tricky to ensure if you don't directly deposit the funds into your bank account.
Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.
- U.S. Department of Labor. "Fact Sheet #30: Wage Garnishment Protections of the Consumer Credit Protection Act (CCPA)."
- National Debt Relief. "What Happens If I Get Served for a Debt?"
- Federal Trade Commission (FTC). "Payday Lending."
- Consumer Financial Protection Bureau (CFPB). "Why did my payday lender charge me a late fee or a non-sufficient funds (NSF) fee?"
- CFPB. "What is a payday loan?"
- CFPB. "What can I do if I can't repay my payday loan?"
- CFPB. "Can a payday lender garnish my bank account or my wages if I don't repay the loan?"
- CFPB. "Could I be arrested if I don't pay back my payday loan?"
- CFPB. "How do I negotiate a settlement with a debt collector?"
- CFPB. "Can a debt collector take my Social Security or VA benefits?"
