Wage Garnishment Laws & VA Home Loans
Veterans and active duty members of the military have the option to get a home loan backed by the U.S. Department of Veterans Affairs. This loan carries many benefits, but it is still a home loan that must be repaid. As such, those who find they cannot repay it are left facing several questions. One of these is whether or not their wages will be garnished to repay the debt.
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Understanding Wage Garnishment
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Wage garnishment is a process wherein a lender takes a portion of your wages as payment for a debt until the debt is paid in full. This is a right of most lenders, including mortgage companies. In order to follow through with wage garnishment, the lender must first file a lawsuit again the borrower and win that lawsuit. Wage garnishment laws require your employer to withhold the portion of the earnings for your lender. Federal laws allow lenders to take the lesser of 25 percent of your disposable earnings or 30 times the federal minimum hourly wage. Some states limit this even further.
The VA Home Loan
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A VA home loan is a loan offer to certain qualified veterans, active duty military personnel and surviving spouses of certain veterans. It is a 100 percent financing option that is offered through a traditional bank but backed by the federal government. Veterans who qualify for the loan apply for it as they would a traditional loan, but go through a lender who works with the VA home loan program. The government backing makes the loan less risky, which is why the lender is able to offer 100 percent financing.
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Garnishment and Mortgages
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Wage garnishment for mortgages, including VA home loans, is possible, but many lenders will choose to foreclose instead. Mortgage lenders rarely take the time and spend the money to take their borrowers to court, especially when they have the backing of the government plus the ability to reclaim and then sell the home in question. Alternatives available to distressed homeowners also lower the chances that the lender will go to court. The laws do not prevent lenders from garnishing wages from those with VA loans, but the structure of the VA home loan program makes it less likely.
Alternatives for Distressed VA Borrowers
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Veterans who find themselves unable to pay their mortgages have many options available to them, both through the VA and through traditional means. Some lenders will offer loan modification or a repayment plan that works with what the veteran is able to pay. Special forbearance, which is when the lender agrees not to initiate foreclosure for a period of time until the borrower can repay the missing payments, is also possible. Lenders may allow the homeowner to arrange a short sale or enter into a deed-in-lieu of foreclosure agreement. VA borrowers who are struggling to pay their debts due to active duty can request help under the Servicemembers Civil Relief Act, which provides relief while they are serving on active duty. VA supplemental servicing assistance may also be available to help cover the default and keep the individual in the home.
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