One of the most difficult forms of debt collection to overcome is wage garnishment. Creditors, such as credit cards and medical bill collectors, can often take up to 25% of your net pay. Debts owed to taxing authorities, such as the IRS, may result in even more being deducted. If you are living paycheck to paycheck, a wage garnishment can ruin your family budget.
A garnishment works like this: The Creditor will file a Process of Garnishment with the court where it has obtained a judgment against you. The court will then serve the Process of Garnishment on your employer or your local bank depending on where the Creditor believes it can get the most money. After your employer or bank is served, you will receive notice of the garnishment giving you an opportunity within 30 days to claim an exemption or file an objection to the garnishment with the court.
Your employer is required to start deducting up to 25% from your wages and send the money to the court. The Clerk of Court holds the money until the funds are condemned by the Creditor. The Creditor must file a Motion to Condemn the funds before they are paid from the Court to the Creditor.
This is where bankruptcy can provide you the relief that you so desperately need. The bankruptcy code provides a powerful tool called the “Automatic Stay” which stops the garnishment cold in its tracks. Once a bankruptcy petition is filed, the automatic stay goes into effect and requires creditors to cease any further collection efforts on the debt.
WHEN DOES THE STAY APPLY?
The stay takes effect as soon as a Voluntary Petition is filed. When filed, a notice is sent to all creditors, informing them of the stay. The notice is usually sent out within a day or two of filing. Rather than waiting, a copy of the notice can usually be obtained from the court docket on the date of filing. It can then be hand-delivered, faxed, or electronically delivered to the creditor. Since an employee’s wages are being garnished, a copy should go to the employer’s HR department. The sooner this is done, the sooner the garnishment can be stopped.
CAN I GET MY MONEY BACK FROM THE COURT?
If you file bankruptcy before the funds are condemned by the Creditor, the Clerk of Court will return the money to your employer, who will pay the money back to you. This is why the timing of your bankruptcy is so important. Once the funds are paid to the Creditor, the funds are no longer property that you can retrieve just by filing for bankruptcy protection.
If the Creditor attempts to garnish your bank account, the funds in the account will be frozen on the date that the garnishment is received by the bank. A garnishment sent to your bank is considered a “one-time” garnishment, meaning it does not automatically continue like wage garnishment. Once the money is sent from the bank to the court, the bank is no longer obligated to continue sending money to the court. The Creditor would need to serve another Process of Garnishment on your bank to have it freeze any future funds that you deposit in the bank account. Filing for bankruptcy will stop the garnishment and force the bank to release the funds in the bank account to you.
WHEN DOES THE STAY NOT APPLY?
The stay does not apply to domestic support obligations, i.e. child support and alimony payments. If a wage withholding order is in effect for either of these obligations, the bankruptcy court will not stay the order, and the support will continue to be deducted from your wages.
If you had two previous bankruptcy cases dismissed within a year of commencing the present case, the stay will not be automatic. Thus, garnishment could continue. However, you may file a motion with the court to impose the automatic stay if you can prove that your current bankruptcy case was filed in good faith.
If you are struggling to pay your debts and concerned about the future welfare of you and your family, it is important that you seek the advice of a bankruptcy lawyer to ensure that your assets are protected and the debts you seek to eliminate are dischargeable. Our attorneys have been assisting consumers and business owners with bankruptcy matters for over 25 years. If you are considering filing for bankruptcy, please consider contacting the Nomberg Law Firm. My office number is 205-882-5005.
Steven D. Altmann has been a lawyer for more than 25 years. Steve has earned an AV rating from Martindale-Hubbell’s peer-review rating and was recently named a Super Lawyer and Top Attorney by Birmingham Magazine in the area of Bankruptcy Law.
We are a Federal Debt Relief Agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.