Wage garnishment can cause a personal financial crisis.
Image source: Attorney-NewYork.com
If your money troubles are so deep that you’ve been garnished by a creditor, the good news is that even if the money has already been taken (or is still being taken), in many cases you can actually get it refunded as part of your bankruptcy! Under Section 522(h) and Section 547 of the Bankruptcy Code, you may be entitled to recover funds garnished so long as certain requirements are met.
For debtors with delinquent student loans and income taxes that are subject to garnishment, you should be able to temporarily stop a garnishment action with your bankruptcy filing. For Chapter 7, there will be a temporary stay and for a Chapter 13 you will be able to limit your repayment based on your ability to pay during the term of your repayment period. Child support and alimony garnishments won’t be stopped at all - this must be done through family court.
But for other debts, you’ll get much better relief – that is if a judgment was even ordered. We wrote recently that North Carolina doesn’t often allow garnishments unless it is for child support, alimony, student loans or taxes. They won’t generally allow garnishments for credit cards, auto loans and other more common debts. However, if the creditor manages to get a garnishment order issued in another state, they can send it to your employer and it will (very likely) be honored.
Wage garnishment can be shut down by a well-timed bankruptcy.
Image source: WageGarnishment.org
If this has happened to you and you have had money taken for an out-of-state garnishment order - as long as it’s not for student loans, alimony, child support or income taxes – not only should you be able to shut it down for good, but you can get a refund if more than $600 was taken. First, as soon as the bankruptcy is filed, you must provide your employer with a copy of the paperwork so they know the garnishment can be halted. Second, you provide notice to the creditor and they will have to return any money taken in the last 90 days so long as more than $600 was taken!
The creditor should return the money after you make the request. If they don’t, you may need to involve your Trustee – get your bankruptcy attorney to handle this. If you have filed Chapter 7, you will likely be able to keep the refunded garnishment amount (so long as you aren’t already maxed out on the amount of assets you can exempt). If you are in Chapter 13, your Trustee will likely want to apply the funds to your secured creditors, but this will still work out more beneficial for you in the long run.
If you’re being garnished and harassed by creditors, contact the law offices of John T Orcutt to find out how a North Carolina bankruptcy can help you end your debt dilemma and get a financial fresh start!