Stopping A Wage Garnishment.
A wage garnishment arises when a creditor has obtained a judgment against you and has requested that the court issue an order to your employer to withhold an amount from your wages to pay it. The amount withheld from each pay is set by law.
Roughly speaking, a creditor can take 25% of your income after taxes. You have no control over the amount and it makes no difference what your own expenses are.
Your income can be garnished only if you earn, after taxes, more than the minimum wage multiplied by 30. The minimum wage is currently $7.25. The amount that is protected from garnishment is $217.50 (30 x $7.25). Your creditor may only garnish income over $217.50.
Chapter 7 bankruptcy will stop a wage garnishment.
Let’s look at this from the perspective of before a lawsuit is filed and after suit is filed.
1. Lawsuit Threatened But Not Yet Filed.
Once you have become delinquent in your payments, an unsecured creditor may turn over the account to a collection agency. Now you can expect never ending calls from the collection agents for payment.
Although you are protected, somewhat, from abusive collections practices by the "Fair Debt Collection Practices Act" (the FDCPA), scare tactics are still common. Usually, these amount to threats to garnish your wages.
People seeking bankruptcy information will always ask about garnishment. REMEMBER THIS: A wage garnishment can never be entered against you except by a court order.
In other words, the threat of garnishment is an empty threat if you have not yet been sued. However, a suit may be inevitable, so you should always plan ahead.
By filing a Chapter 7 bankruptcy, a creditor will be prohibited by the bankruptcy court from ever instituting a lawsuit against you. However, in order to get this protection, YOU MUST HAVE ACTUALLY FILED YOUR BANKRUPTCY.
Merely telling your creditor that you plan to file bankruptcy or talking to a bankruptcy attorney is NOT enough to stop a lawsuit from being filed. However, it is not too late even if suit has been filed.
2. Lawsuit Already Filed.
You’ve just received suit papers from the court. A lawsuit is now pending against you. What do you do?
If you have already determined that bankruptcy is right for you, now’s the time to begin the filing process. Even though it will take a while to actually get it filed, don’t worry.
You will have enough time to avoid a wage garnishment because of the time provisions inherent in any lawsuit.
After a suit is filed, you will have a period of time in which to “Answer” it. This time period varies from state to state but is usually around 20 to 30 days.
If you don’t “Answer” it within the time period, the creditor can obtain what is known as a default judgment against you.
Now the creditor has to wait a set period of time (again this varies by state) before it can request that a wage garnishment be entered against you.
While all the above time periods are running, you are working towards filing your bankruptcy. NO MATTER WHERE YOU ARE IN THE COURT PROCEEDING, A CHAPTER 7 BANKKRUPTCY WILL STOP IT DEAD IN ITS TRACKS.
The way the creditor activity described in 1 and 2 above is stopped is by the issuance of an injunction called an automatic stay
To learn more about this, go to
The Automatic Stay.
A Word for the Procrastinator.
Alright, you’ve ignored all the court papers you’ve received. You just got this week’s paycheck and with it, a note from your employer that your wages have been garnished.
Your check is suddenly about 25% less than it should be. Now what do you do?
It’s still not too late to stop the garnishment. But, now, time is of the essence. You have to move quickly to get your bankruptcy filed.
Why? Because the wage garnishment can only be stopped by the automatic stay and the automatic stay cannot be issued UNTIL THE BANKRUPTCY IS FILED.
Now Let's Find Out What’s this Going to Cost.
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