I received a wage garnishment. Can filing for Bankruptcy help?
You get home and check your mail when you notice a discreet envelope from a marshal’s office that says “Personal and Confidential.” You open it up and you see, in big letters at the top of the letter, “GARNISHMENT.” In a few weeks, you notice that your paycheck is smaller. You notice a new deduction: GARNISH. It’s been a long time coming, but now that you realize your wages are being garnished, can filing for bankruptcy help?
GETTING TO GARNISHMENT
Before exploring how bankruptcy may help with garnishments (which it surely can), it might help to review the process of how a claim gets to garnishment. Let’s look at the example of a credit card debt. Let’s say you have a credit card. At some point, for whatever reason, you stop paying the credit card. One month, two months, three months goes by with no payment. You start receiving the letters threatening lawsuits and collection.
Some creditors will then send the debt to a debt collector for collection. You receive several more notices, this time from the debt collector (sometimes, the debt gets sold to several debt collectors in a row). Nothing gets paid to these collectors. The creditor (which may be the original creditor or one of the collectors, depending on how the debt was transferred) then sues you in court for the claim, plus interest, plus costs and fees. If you’re like most people, you don’t appear in that court action, so a default judgment is entered against you.
WHAT DOES A MARSHAL HAVE TO DO WITH A WAGE GARNISHMENT?
After some time, that default judgment is filed in the clerk’s office. From there, the creditor is left with trying to enforce that judgment. Here in NYC, the only party that can enforce a judgment is a marshal (or sheriff). Unfortunately for a judgment creditor, you have to provide the marshal with any information to collect. That is, the marshals don’t go on wild goose chases trying to find money for the creditor. The creditor must supply information on assets that can be attached, such as bank accounts or job information.
Creditors, especially larger financial institutions, will use several tools at their disposal to find information about you. They will try to cross-reference your information with whatever data they have available. They can use credit reports, agencies that scrub for this information, and so on.
HOW DOES A CREDITOR GET MY INFORMATION TO ENFORCE A WAGE GARNISHMENT?
At some point, they’ve found the place where you work. The creditor then supplies that information to the marshal. The marshal then sends certain notices to the employer to confirm employment and, if so, information to begin the garnishment. The employer may be able to push it off for a while, but at some point they must comply. (If you have a good relationship with your employer, they may even tell you that they received a notice from a marshal to garnish.) Then, after some time has passed, your wages are now being garnished.
CAN FILING FOR BANKRUPTCY HELP WITH GARNISHMENT?
Filing for bankruptcy can absolutely help with a wage garnishment. First, because of the automatic stay that takes effect upon the filing of a bankruptcy case, the marshal must stop garnishment of wages. (It may take one or two pay cycles for this to complete, but in any case, it should be fairly quick.) So, right off the bat, filing for bankruptcy helps to add that money back into your paycheck so that you can use it for your necessities.
Another great way that filing for bankruptcy helps when your wages have been garnished is that you could, potentially, recover some of the monies garnished. Payments made to a particular creditor in the ninety days before the bankruptcy filing may be a preferential payment. That is, you can’t pay one creditor before filing a bankruptcy and treat other creditors unfairly, so such a payment may be treated as a preference payment. If your case allows for it, that preference payment can be exempted, and a demand can be made to the creditor to return that money. It usually takes some time, but creditors generally send the money back!
Dealing with a garnishment is never easy. First, it’s often frightening and stressful to receive notices from a marshal, and people often don’t know how to respond. Second, once a garnishment starts, money is taken away from you that you need for your daily living. Filing for bankruptcy can provide a lot of relief if your wages are being garnished. First, the automatic stay stops more money from being garnished from your paycheck. Second, you might be able to recover some of that money after the filing of your bankruptcy case.
If you or someone you know are dealing with a wage garnishment and would like to see if filing for bankruptcy can help you, contact the Law Office of Richard Kistnen immediately to schedule a consultation so that you can file your bankruptcy case quickly and stop the damage caused by a garnishment.
Law Office of Richard Kistnen
128-22 Rockaway Boulevard
South Ozone Park, NY 11420
Tel.: (718) 738-2324