Consequences of Filing Bankruptcy in 2026

Say a staff member's disposable earnings are $2,000.

No. Under Title III of the Customer Credit Protection Act (CCPA), you can not discharge a staff member whose incomes go through garnishment Nevertheless, the CCPA does not secure employees whose profits are subject to two or more garnishments. You need to start garnishing an employee's earnings when you get a trainee loan garnishment order.

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Stop withholding if you receive a main notification. You can easily set up a wage garnishment in Patriot's payroll software application. Keep in mind that you are responsible for remitting garnishments to the appropriate firms. You can find out how to set up a wage garnishment here.

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The U.S. Department of Education (the Department) today revealed that it will postpone the application of involuntary collections on federal student loans, consisting of Administrative Wage Garnishment (AWG) and the Treasury Offset Program (TOP). The short-term delay will allow the Department to carry out significant student loan repayment reforms under the Working Households Tax Cuts Act (the Act) to provide borrowers more alternatives to repay their loans.

The Act decreases the variety of federal trainee loan payment strategies, eliminating a confusing labyrinth of choices and making it easier for debtors to select either a single basic repayment plan or income-driven payment (IDR) plan that finest meets their needs. This consists of a brand-new IDR strategy that waives unsettled interest for borrowers with on-time payments whose payments do not totally cover accumulated interest, which consists of small matching payments from the Department in particular situations to guarantee that exceptional principal is minimized each month.

The delay in collections will offer defaulted customers extra time to evaluate these brand-new payment alternatives once they combine their loans or complete a payment or rehabilitation arrangement. The Act likewise gives customers a 2nd opportunity to rehabilitate a defaulted loan, permitting them to get their repayments back on track and get the loan out of default.

The delay in collections will give defaulted borrowers extra time to start the rehab process, including the capability to restore their loan a 2nd time.

The Trump administration will resume garnishing earnings from trainee loan borrowers in default in early 2026, the U.S. Education Department verified 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 approximately 1,000 defaulted borrowers the week of January 7," a department spokesperson told NPR.

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A customer remains in default when they have not made loan payments in more than 270 days. When that happens, the federal government can attempt to collect on the financial obligation by seizing tax refunds and Social Security advantages, and likewise by purchasing a company to keep as much as 15% of a borrower's pay.

Betsy Mayotte, the president and founder of The Institute of Trainee Loan Advisors, says despite the fact that debtors have expected this, the timing is unfortunate. "It will coincide with the increase in health care expenses for numerous of these defaulted customers," she said, describing the premium increases for Affordable Care Act medical insurance 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 have actually got about 12 million customers today 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 added to this story.

(Post Updated Jan. 6 and 8, 2026) This article notes federal and state consumer law changes set up to enter into effect or expire during the duration from December 1, 2025, through January 1, 2027. Other customer law modifications will be enacted in 2026 and will go into effect in 2026; this post notes modifications whose reliable dates have currently been arranged since December 31, 2025.