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Your unemployment benefits cannot be garnished by anyone but your state government for past due state taxes, and even then it as a last resort. However with a court order the loan holder can garnish your bank account under the guise that they had no idea the money was from unemployment benefits (the IRS will not do this) - and good luck getting that money back any time soon. They will hold onto it for months and months. There are also a couple of states Like Louisiana) that have Napoleonic law, which means, they can get the sheriff come take your personal items to sell as part of the payment on your defaulted loan.

If you are in dire straights. Call the IRS. Tell them you are on unemployment and they will stop all collections until you get a job. Seriously. They do this. Please note that if you get a job and fail to contact them, they will levy your wages and property, so your employer will know and so will anyone who looks at your credit report.

If you contact your lender and they won't work out a payment arrangement in writing with you, contact a bankruptcy attorney to go over your options.

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Q: Can unemployment be garnished for loans and by IRS?
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