One day you go to work and find that your paycheck is being garnished for a debt that you owe. This happens to people every day. In addition to all of life's problems you now are worried about how you are going to pay your mortgage, electric bill, or even buy food. When people are experiencing the described problems associated with having a wage garnishment, normally the first question they ask is, "how can I put a stop to this?" The answer in many cases is that you'll need the help of a qualified attorney. First, though, it helps to understand how garnishments happen in the first place.
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The Creditor Must File a Law Suit
In order for a garnishment to take place, a creditor must have filed a law suit against a debtor and obtained a judgment. Garnishments typically take on two forms. Once a judgment is entered, the creditor has the option of either garnishing wages or placing a levy on a bank account (i.e. freezing a bank account). The creditor must choose and cannot exercise both options at the same time.
Fortunately, there are ways to stop a wage garnishment or bank levy. Options for stopping a garnishment include filing for bankruptcy but can include other methods. If creditors are threatening a wage garnishment or to freeze a bank account without first obtaining a judgment against you, the creditor has violated consumer protection laws including but not limited to the Fair Debt Protection Act. If a creditor has threatened to garnish wages or freeze your bank account without first obtaining a judgment, call a consumer protection attorney to discuss your rights and what steps you should take.
Garnished Wages / Bank Account Levy
Of the two forms of garnishment, most people experience garnishment of wages. Most state codes limit the amount of wages that can be garnished based on a person's annual income. Typically, twenty-five percent of net earnings can be garnished per pay period until the wage garnishment limit is reached.
When a creditor chooses to levy a bank account rather than garnish your wages, your bank is required to hold the funds for a period of time, which includes any ongoing direct deposits. After the period of time expires, the funds are turned over to the sheriff to be transferred to the clerk of court. After the clerk of court has received the funds, the creditor must file to a Motion to Condemn Funds with the clerk of court in order to receive the money. If the amount turned over to the creditor exceeds the amount of the judgment, the debtor will receive any excess levied funds.
During the levy period, a debtor may not access their bank account to withdraw funds. It is advised that the debtor stop any automatic or direct deposits of pay checks or from other sources. Likewise, it's advisable to stop all automatic withdrawals from the bank account during the levy period. Continued automatic withdrawals, in addition to the levied funds, can cause significant overdraft fees and bank charges.
Stopping The Garnishment or Levy
Stopping a wage garnishment can be a long and rocky road. Filing a chapter 7 bankruptcy or chapter 13 bankruptcy stops all garnishments and levies. This is because Bankruptcy Code 11 U.S.C. 362(a) provides that once a bankruptcy is filed an automatic stay goes into place restricting all creditors from any collection activity.
If only it were that easy.
Typically, even upon filing the bankruptcy, it will take anywhere from one week to a month or more to stop a garnishment. This is due to several parties having to work together. These parties include, but are not limited to the following: your bankruptcy attorney; the clerk of court where the judgment was entered; the sheriff's office in the county where the garnishment was served; the payroll department or bank; the bankruptcy trustee; and the creditor's attorney. Immediately after your bankruptcy attorney files your bankruptcy, they should send a Notice of Bankruptcy to all parties including the sheriff's office. The sheriff is supposed to immediately notify your employer or the bank where the money is being levied and let them know they are to stop taking the money and release any held wages or money right away. The payroll department, whether local or out of state, can also play a role in how long it takes to stop a garnishment. Also, every clerk's office and sheriff's office in each county handles garnishments differently. Issues arise and tend to arise often.
As you can see there are numerous moving parts to getting levies and garnishments released. It's important that you work with an experienced bankruptcy lawyer that has an efficient and effective method for dealing with garnishments and levies.
Getting Your Money Back
Finally, there is the issue of whether garnished funds can be retrieved and given back to the client after they have filed for bankruptcy. One determining factor is how much money was seized through the garnishment. The amount of funds that can be claimed as exempt decides how much can be returned to you.
This of course adds an additional step to the equation.
Once the garnishment is stopped your attorney must draft and have the bankruptcy trustee sign off on a motion to release funds. You'll need to be patient and understand that it takes time to get everyone to do what must be done.
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