Articles Tagged with Garnishment

Yes! You can get back money that was garnished from your wages (if the debt is dischargeable) if you file bankruptcy.  In Mississippi, you can only recover garnished wages were taken within 90 days of your filing for bankruptcy and the amount taken was more than $600.  You are not entitled to recover everything that’s been garnished if you’ve been garnished more than 90 days before you file bankruptcy; just the 90 day portion they took right before you filed bankruptcy.  ***Keep in mind that filing bankruptcy STOPS a garnishment the moment the case is filed!

Depending on which kind of bankruptcy case you file and the amount, the money may go back to you or it may go to the Trustee.  But either way, it’s beneficial to you.  How would it be beneficial for it to go to the Trustee? Keep reading. I’ll explain!

Example #1: You have been garnished for the past 2 months for a total of $800 and you file a Chapter 7 bankruptcy tomorrow.  The first two criteria are met (within 90 days and over $600) so you stand to regain all $800.

Example #2: You have been getting garnished for 6 months for a total of $1,500 and you file a Chapter 7 bankruptcy tomorrow.  You’re qualifying but only the portion taken within 90 days will be eligible – which lets say totals $700.  The creditor is entitled to keep the other portion ($800).

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I have found it helpful to share this checklist with people who call asking me “Should I file bankruptcy?” In a nutshell, if more than two of the following issues apply to you, it is possible that bankruptcy would be an option worth investigating further:

  • Debt collectors are calling you at home or at work.
  • You are utilizing payday loans to make ends meet.
  • Your wages will soon be garnished or are being garnished now.
  • Your bank account has been frozen.
  • The majority of what you owe is unsecured debt like credit cards, medical bills, payday loans, etc.
  • Your facing the threat of foreclose on your home.
  • The foreclosure process on your home has already started.
  • Your facing possible repossession of your vehicle.
  • You have had a vehicle repossessed.
  • You want to give up your house or vehicle and walk away without owing any money.
  • Your bill payments are more than 30 days behind.
  • You have been sued or are being sued over debt.
  • You have a significant amount of medical debt that will not be covered by insurance.
  • You have medical insurance but can’t afford to pay your share of the bills.
  • You owe income taxes that you cannot afford to pay.
  • Your total debts (other than house & car) are more than you could pay and still live, even over five or more years
  • You have high student loan deb, cannot defer payment any longer, and the notes are more than you can pay

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If you are having trouble paying back your student loan debt, you may be relieved to hear that the Department of Education has created new rules that will give you more protection from debt collectors collecting on federal education loans.  These new regulations should make it easier for you to get your loans out of default.

These rules do not apply to private student loans, only to loans made or guaranteed by the federal government.  If you are in default you can”rehabilitate” loans by making nine “reasonable and affordable” on-time payments. This will allow you to get out of default and become eligible for further federal student aid or other repayment programs.

Some private debt collectors who were collecting on federal loans were failing to offer payments that borrowers could afford; instead offering payments based on a percentage of the borrower’s total debt.  Such payments meant increased commissions for the collection agencies, but were unworkable for borrowers.  Debt collectors were also demanding minimum monthly payments without telling people about the more affordable alternatives, even though the laws of federal student aid does not require those minimum payments.

To review the various clips of attorney Frank Coxwell’s appearances on the Fox 40 AM Show, click here to go to our Media page.  Mr. Coxwell discusses multiple topics on the show – the garnishment process, how to stop foreclosures in Mississippi,  how to deal with student loans, the pitfalls of the new “business” credit card offers, and more.

Frank on Fox Set 2Frank on Fox SetFrank on Fox Set 3

In order for a creditor to garnish your wages, they must first file a lawsuit regarding the debt in question and receive a court judgment in their favor (win the lawsuit).  Once this occurs, they will receive an order of garnishment also referred to as a writ of garnishment.  This order is sent to your employer who must hold this writ of garnishment for 30 days.  The reason a 30 day hold requirement was placed into the process is to allow time for the employer and the employee to verify that the order is for the correct person, etc.  The problem is that employers are not required to notify you that they have received an order of garnishment.  They may simply hold it and you will find out 30 days later when your first check is garnished.

It’s important to note that a garnishment is applicable to any money in possession of a third party (ie: your employer, your bank, etc).  It’s not limited to only what you earn.  Wage garnishment is simply the most common form of garnishment.

Garnishment is an option for a creditor for any type of debt that results in a judgment in favor of the creditor.  Lawsuits for breach of contract or to collect debts owed for cars, medical expenses, promissory notes, etc are all applicable.  Even debts relating to taxes and domestic support obligations (child support or alimony) can lead to garnishment.

I get countless calls from people asking what they can do to about their parents or grandparents who co-signed for them on a student loan and are now facing garnishment, loss of their tax refunds, or even seizure of their bank accounts because they co-signed and the loans have not been paid.

This is a common tactic for debt collection on student loans.  If the student isn’t working – they will go right after anyone who co-signed for the loan.  And they have broad powers – there is no notice required – they can garnish, etc without warning unlike collection of normal debt where there must be a lawsuit filed and judgment obtained first, etc.

It’s pretty well known you cannot wipe out student loans through bankruptcy, but if you file a Chapter 13 bankruptcy, you can stop all action – against you AND against anyone that co-signed for your student loan.  Chapter 13 bankruptcy protects the debtor and co-debtor.  Both do not have to file – just one.  If the co-debtor files it protects the main debtor and vice versa.  For example – mother co-signed for son’s student loan.  Mother files Chapter 13 bankruptcy (maybe even for other reasons) – it protects the son regarding the student loan they both signed for.  Or son files Chapter 13 bankruptcy – it protects the mother.

Most of my clients come to me after a garnishment has been sent to their job. A few come to see me as soon as they are served with the lawsuit.  I wish they would come to see me on the day they get sued, but that is not always practical.

If you get sued or served with papers trying to collect a debt there are several things you can do.

1) Ignore everything and hope it goes away.

student loan debtYes and no.  Student loans cannot be discharged in a Chapter 7 or Chapter 13 bankruptcy (unless you can establish substantial hardship).  Changes to the US Bankruptcy Code in 2005 even made private student loans non-dischargeable. BUT – a Chapter 13 does allow you to decrease or stabilize the repayment of your student loan debt for a 3-5 yr period.  In a Chapter 13 bankruptcy, you can decide how much you can afford to pay monthly towards this debt rather than being at the mercy of possible garnishment, seizure of your tax refund, and bank account funds.  If you are facing hardship due to student loan debt, consult an experienced bankruptcy attorney to fully understand all options and strategies available to you as soon as possible.  You may not need to take action immediately, but you need to know what options are available so that you can take action quickly if and when it is needed.