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Can 401k distribution be garnished because of defaulted student loans?
Anonymous3 views3 answers
I defaulted on student loans 4 years ago and my wages were being garnished because of this. I am currently going thru the process of a student loan rehabilitation program and have been making regular payments. However, I am having to withdraw money from my old 401k account to meet some other obligations. My question is can the student loan company intercept this 401k payment before I receive it?
The prior two answers are correct. Once the money is taken out of your 401K where it is protected and placed into a location that is not protected then the creditor can go after the money. However, as was also previously stated if the creditor is getting paid pursuant to the payment terms that have been agreed on they may not want to pursue other collection remedies.
They cannot intercept 401K money prior to it hitting your bank account. Or at least the chances of it are very very slim. However, if they have a judgment and put the 401K money in your bank account then you have changed the character of those funds taking them from exempt money to non exempt money. The creditor could possibly levy the bank account. The question will be will they do that if they are getting paid through a garnishment order and maybe yes and maybe no.
