People contact me every day about the subject of wage garnishment. Either their paycheck is currently being garnished or they are afraid that it soon will be garnished by a creditor to whom they owe money.
For people already struggling with debt problems, having a paycheck garnished is a killer. It can mean not having enough money to make necessary living expenses. Like the rent or mortgage payment. Or the car payment. Or the electric, gas or water bill. Or to buy groceries or medicine.
These people want to know one thing. Will filing bankruptcy stop or prevent their paycheck from being garnished? In most cases the answer is “YES!”
You see, the second a bankruptcy petition is filed, an automatic stay goes into effect. And this automatic stay prohibits a creditor from taking any further collection activity without the permission of the bankruptcy judge. If the garnishment has not begun before your bankruptcy case is filed, then the bankruptcy will prevent the garnishment from beginning at all. If the garnishment starts before your bankruptcy case is filed, then the garnishment will stop immediately after your case is filed.
The automatic stay stops or prevents the vast majority of wage garnishments except for a few exceptions such as for child-support or other court-ordered domestic support obligations.
And what’s more, if a creditor has taken over $600 from your paycheck or your bank account within the 90 days before you file bankruptcy, this is known as a “preferential transfer” and the garnished funds can be recovered from the creditor.
If your wages are being garnished or are about to be garnished and you would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation. I would count it a privilege to be able to visit with you in a relaxed and confidential environment where I’ll answer all of your questions in plain English and give you the straight scoop on the pros and cons of bankruptcy as related to your specific situation.
{ 29 comments… read them below or add one }
i would like find out how i acn go about filing for bankruptcy….my
Judith,
I would be happy to answer your questions and discuss how bankruptcy may be able to help you. Give me a call at 918-615-8260 or email me at dan@nunleylaw.com.
I am having problems with my Employer not stoping a garnishment after i have already filed chapter 7. I did give them the letter that the clerk gave me from when i did file. But she says she needs a letter or something from the Courts that had started the garnishment in the first place. Is this true and can i get my employer to pay back the money they had taken out after i filed.
Thank you, Nate
Nate,
All your employer needs is notice of your bankruptcy filing and then the garnishment must stop. It’s not your responsibility to provide them something from the court that issued the garnishment. By continuing to garnish after having notice of your bankruptcy, both the creditor and your employer are violating the automatic stay which prohibits post-petition garnishment. Local rules and procedures vary from bankruptcy court to bankruptcy court, so check with your local court clerk on how you should proceed since it appears you are representing yourself.
Dan Nunley
Dear Mr. Nunley,
Thank you for taking the time in creating such a wonderful site to help others learn their rights against garnishments and bankruptcy information. I was wondering if you could tell me, after filing for chapter 13 and providing your employer with a copy of your filing a week before payday, how do you get the funds they held out for that paycheck? They have already began cutting checks for upcoming payday a week before we get paid and withheld funds from our check to then send after our automatic stay was in place.
Thank you so much again. Lora
Lora,
The automatic stay that took effect immediately upon your Chapter 13 bankruptcy filing prohibits post-petition wage garnishment and therefore your employer is violating federal law in withholding funds from your paycheck pursuant to a garnishment summons.
What you are experiencing is an all too common practice. As a matter of fact, I’ve had this same situation in three of my own cases just this week. In each of those cases, I telephoned the employer’s payroll office and advised them of the bankruptcy filing, then I faxed or emailed a copy of the file-stamped petition or Notice of Case Filing, and then I educated the employer regarding the automatic stay’s prohibition against post-petition wage garnishment. Lastly I advised the employer that if it proceeded to garnish my client’s wages, I would sue the employer in bankruptcy court seeking punitive damages, costs and attorney’s fees.
Bankruptcy local rules and procedure vary from jurisdiction to jurisdiction and it depends on the relief and damages that you are seeking. Some judges prefer a Motion for Violation of the Automatic Stay while others prefer that an Adversary Proceeding be filed. If you are represented by a bankruptcy lawyer, he or she should know what to do. If you are representing yourself, you’ll need to familiarize yourself with the applicable local rules and procedure.
I wish you well.
Mr. Nunley,
Thank you so much for such a fast, helpful response. It’s so nice to have run across your web site and I can see that you care for people. Lawyers like you restore the public’s faith in our legal system when usually it seems that most attorneys are only concerned with money. Anyone who gets you as their attorney is very lucky.
Good Evening,
In my situation I am actually the creditor. I took out a small claim against someone in 2008 and was awarded judgment for a little over $900. After a year and half of non-payment I went back to the courts and requested her wage be garnished (this was in Jan 2010). Today I recevied a phone call stating that she had filed for Chapter 13 BK. What does this mean for me? I understand that her employer will no longer be obligated to garnish her wages but will I eventually get my money? I read somewhere that they can dismiss my claim and discharge her from having to pay my debt all together? Also what will happen with the money they have already garnished from her paycheck. I am not due to go back to court until March 30th to pick up any funds that may have been garnished. Does this mean she will get that money back and I am once again left with nothing?
Stacey,
As I am licensed to practice law only in Oklahoma and it appears that you live in Virginia, I cannot give you legal advice. I would suggest that you seek advice from a bankruptcy attorney near you who represents creditors.
Dan Nunley
I read where you said that if your wages are being garnished and you file bankruptcy that if they have garnished more than $600 within the 90 days before you filed bankruptcy that that money must be given back. Is that the case in every state? Also can you recommend any good bankruptcy attorneys in Richmond, Virginai? Also I think it is so great that you have put this site on here it is very helpful and informative!!! Thank you so much.
Janelle,
Thank you for your kind words. As I am licensed to practice law only in Oklahoma, I cannot give you legal advice so I would suggest that you find a good bankruptcy attorney near you. A good way to do that is to use the Attorney Finder provided by the National Association of Consumer Bankruptcy Attorneys. I wish you well.
If we file bankruptcy will it stop student loan garnishments as well? We tried to make payment arrangements and they refused our payments and now we don’t have enough money to pay our necessities. They also just took our taxes after garnishing my husband for over a year now. It was said on one of the posts that if bankruptcy is filed that all garnishments from 90 days before will be returned. Is that true and would that include our taxes?
Tiffany,
As I am licensed to practice law only in Oklahoma and you appear to live in Missouri, I cannot give you legal advice. I would suggest that you contact a knowledgeable bankruptcy attorney near you. You may want to use the Attorney Finder provided by the National Association of Consumer Bankruptcy Attorneys to help you in your search. I wish you well.
Dan Nunley
Hi Mr. Nunley,
My question is also about the wage garnishment. My husbands check has been garnished for about a year. They take out around $250.00 every two weeks. If we file bankruptcy within the next 2 weeks, will he get money back from the last 90 days that was taken out of his check? Also, we live in Oklahoma City, do we contact an attorney here or could you handle our case?
Thank you for your excellent website.
Joan,
Any wages garnished within the past 90 days in excess of $600 is a preferential transfer as could be recovered by the Chapter 7 trustee for the benefit of all unsecured creditors. It seems that you are talking about an approximate $3,000 preferential transfer. Whether the trustee would seek to recover this preferential transfer I don’t know. If he/she does, you wouldn’t get the money back. If the trustee takes no action, then your attorney could seek to recover the garnished wages and therefore you should be sure to claim these garnished wages as an exempt asset in your bankruptcy schedules.
I do not practice in the Western District of Oklahoma and therefore you will need to contact a knowledgeable bankruptcy attorney near you. I wish you well.
Dan Nunley
Is this statement based on Federal Law or State law? “And what’s more, if a creditor has taken over $600 from your paycheck or your bank account within the 90 days before you file bankruptcy, then upon notice of the bankruptcy filing the creditor must immediately give back every penny of the money they took.” Is this statement based on Federal Law or State law?
Nathan,
This statement is based on both federal (11 U.S.C. sec. 547) and state law (31 O.S. sec. 1(A)(18)). Garnishments in excess of $600.00 within 90 days of filing bankruptcy are considered “preferential transfers.” If the garnished funds can be claimed as exempt property (here in Oklahoma, I would use the above cited exemption statute for 75% of wages earned in the 90 days preceding the bankruptcy filing), then the garnished funds should be listed on Schedule B and exempted on Schedule C of the debtor’s bankruptcy schedules. I would then call or write the creditor or its attorney and demand the garnished wages be immediately returned. If the creditor refuses, then I would seek relief in bankruptcy court.
Dan Nunley
What if a bankruptcy has been filed in the last 5 years and we are not eligible to file again? Is there something we can do to stop wage garnishment, as this will put us in extreme financial hardship?
I Know chapter 7 does not clear back child support but does it clear the interest on the back child support?
Dawn,
It depends on the type of bankruptcy you previously filed. If your last bankruptcy was a Chapter 7, then you won’t be eligible for another Chapter 7 discharge until at least 8 years has elapsed between the filing dates of back-to-back Chapter 7 cases. However, you are eligible for a Chapter 13 discharge once 4 years have elapsed from the date you filed the Chapter 7 bankruptcy. Chapter 13 bankruptcy is substantially different from Chapter 7, but a Chapter 13 will stop a wage garnishment. I would suggest that you contact a knowledgeable bankruptcy attorney near your for advice appropriate to your specific situation. I wish you well.
Dan Nunley
Nathan,
No. Both the child support and the associated interest would be non-dischargeable in a Chapter 7 bankruptcy.
Dan Nunley
My wages were garnished over a year ago,my employer started taking out the garnishments. Recently i filed for bankruptcy. My employer now tells me he was way behind on paying the money in even though he took it out of my paycheck. My question is does that money come back to me or does he have to pay the creditor? I just don’t want him hanging on to this money which is a pretty good amount. Thank you for your time.
Benny,
The instant your bankruptcy case was filed, an automatic stay went into effect which prohibits your employer from taking any further action including the forwarding of money to a judgment creditor. The money that your employer withheld from your pay check pursuant to the garnishment summons now must be returned to you since it wasn’t sent to the judgment creditor before your bankruptcy was filed.
Dan Nunley
I have been in the process of seeking wage garnishment from someone whose minor daughter hit me in a car accident. I received a letter from a bankruptcy court that the debtor is filing chapter 7. Is there anything I can do to collect this debt?
Sharon,
The automatic stay that took effect immediately upon the debtor’s filing Chapter 7 bankruptcy prohibits all creditors and collection agencies from taking any further action to collect a debt owed by the debtor. Unless you immediately stop all garnishment activity, you will expose yourself to being sued in bankruptcy court by the debtor. If the debtor has any non-exempt assets that will be administered by the Chapter 7 trustee, you will be advised to file a proof of claim in the bankruptcy case and you would then receive some payment towards your claim. If the debtor has no non-exempt assets, then your claim against the debtor for damages arising from the auto accident will be discharged in the bankruptcy and you will be forever barred from seeking to collect the debt owed you by the debtor. The only exception would be if the debtor’s daughter was convicted for drunken driving in the subject motor vehicle accident, then the debt owed you would survive the bankruptcy discharge.
Dan Nunley
Last year I won a case from a car accident. I was in the process of seeking wage garnishment. Last month I got a letter from a bankruptcy court regarding a meeting of creditors. The person is filing Chapter 7. Will I be wasting my time to attend knowing that my only defense is that the debt owed to me was ordered by a Judge?
Sharon,
Unless the car accident judgment involved a DUI/DWI conviction, the judgment you were awarded would be dischargeable in Chapter 7 bankruptcy. If a DUI/DWI was involved, you would want to file an adversary proceeding in the Chapter 7 case. If a DUI/DWI was not involved, then you would be wasting your time to attend the First Meeting of Creditors.
Dan Nunley
I am quite sure that bankruptcy is our only option at this point. When calculating gross annual income, is Unemployment calculated in? I have been unemployed since August 2008 ( when our troubles began) until recently February 2011. I have accepted a part time job while actively looking for full time employment. My husband is employed full time. We have received several summons from the courts from creditors, we have responded as instructed. We will not be able to afford any garnishments. We worked with our mortgage company for 14 months regarding a loan modification, only to be turned down and now they are going to proceed with foreclosure. In my opinion, they had no intention to modify the loan. Just a way to get us to keep paying a temporary lower amount until they got to our case to foreclose. Thanks in advance for your response. More than likely, will be seeking a consultation very, very soon.
Pam,
Since Social Security benefits are not considered in gross income calculations under the Means Test, and because the Social Security Act of 1935 (Public Law 74-271) created the Federal-State Unemployment Compensation (UC) Program, I disclose the unemployment benefits but exclude them in my Means Test calculations. This has never been challenged by the US Trustee.
I agree with your opinion regarding the loan modification process. Only a very, small minority of permanent loan modifications are approved and I believe that in the vast majority of loan modification applications, the mortgage company has no intention or desire to permanently modify the terms of the mortgage.
I’ll be happy to visit with you regarding your situation. Feel free to contact me when you’re ready to move forward.
Dan Nunley