If you live in Illinois and want to take out a high-risk loan, such as a payday loan, the lender might require you to sign a wage assignment. When you sign a wage assignment, you agree to allow your creditor to garnish your wages if you don't pay back the loan. Illinois law limits the amount of money a creditor can take and has specific procedures that a creditor must follow to enforce the wage assignment. However, both Illinois law and federal regulations enable you to cancel the wage assignment and prevent a creditor from garnishing your wages.
A wage assignment is a voluntary agreement you sign that gives a creditor permission to garnish your wages if you don't pay back a debt. Because the agreement is voluntary, the creditor doesn't have to sue you in court to begin garnishment proceedings. To be valid under Illinois law, a wage assignment agreement must be written on a separate piece of paper from the loan agreement and must be clearly labeled "Wage Assignment."
Illinois Procedures to Enforce a Wage Assignment
If you voluntarily sign a wage assignment agreement, your creditor must wait until your loan payment is 40 days late before it begins the process to enforce the agreement. After 40 days, your creditor must send you and your employer a notice by certified or registered mail of its intent to garnish your wages and wait another 20 days to allow you to catch up on your loan payments. If a creditor proceeds with garnishing your wages, it can only take either 45 times the Illinois minimum wage or 15 percent of your gross pay, whichever is less.
Cancelling a Wage Assignment Under Illinois Law
You can prevent a creditor from proceeding with wage garnishment under Illinois law as long as you act in a timely manner. After you and your employer receive notice that your creditor intends to garnish your wages, you have 20 days to notify the creditor and your employer in writing that you no longer authorize your employer to make payments to your creditor. This requires your creditor to sue you in court to collect on the debt.
If you don't notify your creditor and your employer within the 20-day period required by Illinois law, you still have the ability to cancel the wage assignment based on federal regulations. For a wage assignment to be valid and legal under federal law, you must have the ability to cancel it whenever you choose. To stop a creditor from garnishing your wages based on a wage assignment, simply notify the creditor and your employer in writing that you have cancelled the wage assignment. When you cancel the assignment, your employer is no longer permitted to make deductions for the assignment.