Guide to Surviving the Bankruptcy Process
How Does Wage Garnishment Work?
Jim Bowser | July 13, 2010
Despite how ominous the term ‘wage garnishment’ may sound, the truth is that wage garnishment is more rare than you may think. This is mainly because creditors have to follow a number of well-documented steps before they can begin garnishing any debtor’s wages. According to Jim Bowser, a bankruptcy lawyer in Mt. Clemens who is in practice at Bowser & Associates, P.L.C., a debtor cannot have his wages garnished until he has been notified and a judgment by the court has been made, and even at that point it could still take over a month and a half before the wages are actually garnished.
If a creditor is able to secure a judgment to garnish a debtor’s wages, then the creditor’s next step is to determine where the debtor works. If he cannot determine where the debtor works, then he will not have any way of knowing who to contact about getting those wages garnished, according to Bowser.
Of course, a debtor cannot simply refuse to tell his creditors where he works and expect for the wage garnishment issue to be taken off the table entirely. Bowser says that a creditor can haul a debtor into court in order to find out where that debtor works if the debtor will not release the information on his own.
If the approval for the garnishment is given, then the money that is about to be garnished by the creditor will usually be held by the bank in the meantime, and the debtor will receive a notice that his money is being held. The debtor then has 90 days to make a decision and start working on getting that money back. If the debtor files for bankruptcy during that period, then the money will usually be handed over and paid back from whoever took it originally.
Bowser thinks it is important for debtors to know that there are things that a bankruptcy lawyer can do to protect debtors in these cases. In Mt. Clemens, Bowser frequently represents bankruptcy clients who are hoping to stop a wage garnishment, or even to get back money that was previously garnished by certain creditors. He says that as long as the bankruptcy attorney can get to the court within 90 days of the actual garnishment, the debtor should expect to be able to get back any money that was taken out of his paycheck or accounts.
For example, if a person discovers that his wages were garnished after looking at his most recent paycheck, then that does not necessarily mean that money will be lost forever. In that scenario, the debtor simply needs to find a bankruptcy lawyer who agrees to take on the case.
Creditors cannot take out any more than 25% of a person’s take home pay—assuming the debtor is a paycheck-type employee—and as long as the amount that was taken out was more than $600, an attorney can get involved and stop the garnishment and debt collection from moving forward. These same rules apply to bank garnishment as well. If a creditor attempts to seize money from a person’s bank account and takes at least $1,500, then the best advice is to see a bankruptcy lawyer right away. “If you file for bankruptcy within 90 days, then you should get that money back,” Bowser says.
In fact, a skilled attorney should be able to get a client’s wages back from any judgment as long as he works quickly enough. There is a short period of time during which an attorney can act, however, which is why it is so important for debtors to get in touch with an attorney and explore their options as quickly as possible.
One type of bank account that cannot be garnished in most cases is a qualified retirement account. Commonly, accounts like 401(k)s, and IRAs usually fall into this category of untouchable bank accounts, although annuities can be “tricky” and may sometimes fall into the category of accounts that can be garnished by creditors. Any type of bank account that cannot be taken through the garnishment process is known as an “exempted” account. Accounts that are exempted cannot be taken or drained during a seizure by the bankruptcy court, the bankruptcy trustees, or the creditors. “And debtors can have unlimited exemptions,” Bowser says. “So they can have an enormous amount, like several hundred thousand dollars, and that would be protected in a bankruptcy.”
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.
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