Does Bankruptcy Mean Cutting up Credit Cards? 

What to Do If Your Wages Are Garnished

March 17th, 2020 by Bunch & Brock

Does Bankruptcy Mean Cutting up Credit Cards? 

There may have been a time in your life when things were going very well from a financial standpoint. You had money in your checking account, you owned a car and a home, and you were able to plan vacations. But something happened, and everything started going downhill. You may find yourself now with significant debt and harassing phone calls from creditors. When this occurs, you need not despair — there are solutions for every situation.

If you are about to have your wages garnished, there are options available that can prevent this from happening. An experienced attorney can assist in helping you explore bankruptcy to protect your finances until you can get things straightened out. To learn more about your legal rights and to begin building a brighter future, contact an attorney at Bunch & Brock at 859-254-5522.

What is wage garnishment?

Even if you are about to have your wages garnished, you may not fully understand what is about to happen. Wage garnishment starts with a court order that grants the creditor permission to collect 15% to 25% of your wages after taxes to pay off your debt. The status of your tax filing will also affect this deduction. If there is no paycheck or means to collect from an employer, the creditors may get a court order to get money from your checking or savings account. This is usually the first route creditors take when attempting to garnish your wages.

How can I prevent garnished wages?

The U.S. Bankruptcy Code has provisions that protect the individual from wage garnishment. All legal proceedings against the person must immediately and automatically stop once they file for bankruptcy protection. This means all collection actions, foreclosure proceedings, repossessions and liens will be put on hold, pending the outcome of the debt restructuring under Chapter 13 or any debt discharges under Chapter 7.

An experienced bankruptcy attorney can file an emergency petition for bankruptcy for court approval. It is also called an automatic stay. This can prevent your wages from being garnished and any monies that have been taken to be returned.

It is important to know your rights. Many creditors and collection agencies break the law by using aggressive tactics. You do not have to subject yourself to this type of harassment. A bankruptcy attorney can step in on your behalf to protect your rights. Although bankruptcy is not the answer for some, if you are facing wage garnishment, this solution could give you peace of mind and help you get things back on track.

This could make a significant difference in what happens next. If you are granted an automatic stay and the creditors continue enforcement action, they will be subject to a civil suit. You could be granted compensation for damages, attorney’s fees and punitive damages as well.

Can you reverse a wage garnishment?

There are steps that can be taken to potentially reverse a wage garnishment though there is no guarantee of success. First, you could file an appeal with the court if you do not agree with the garnishment, and then you will have to follow up with arguments about why you are appealing the ruling. Second, you could file a claim of exemption with the court if you believe that the garnishment is preventing you from being able to meet your basic living expenses. Be prepared to provide proof of your income and daily living expenses to the court for review.

Can you explain wages garnished in greater detail?

Creditors must first get a judgment that they then file with the court to start the garnishment process. This does not apply to wages kept to satisfy tax levies, child support arrears, or defaulted student loans. Created in most states a century ago, the garnishment process has its roots in trying to prevent debtor deception. Creditors sought a way to stop the practice of debtors’ claiming poverty while giving away assets to a trusted party for return in the future. Federal and state laws have since been enacted to safeguard the rights of both garnishors and garnishees.

The main measurement of wages for garnishment purposes involves “disposable earnings,” which is the amount of income that an employee has left over after the mandatory contributions are deducted. Those voluntary deductions not required by law are garnishable.

Though wage garnishment can cause feelings of isolation or embarrassment, it’s actually quite common. In a 2013 study by the ADP Research Institute examining payroll data from 13 million workers aged 16 years and older, it was determined that 7.2% had wages garnished that year. The number rose to 10.5% for employees aged 35 to 44 years old. Garnishment rates were highest for mid-range wage earners (those earning between $25,000 and $40,000), among the manufacturing industry (where almost 50% of the companies had garnishments), and in the Midwest (including Kentucky).

Having a portion of income withheld to pay off a debt typically makes it much harder to keep up on other bills and can drive many people to consider bankruptcy. At its core, wage garnishment is a form of collection – which means the automatic stay that comes along with filing for bankruptcy protection applies (except to domestic support obligations). Chapter 7 bankruptcy and Chapter 13 bankruptcy can stop garnishment immediately. If the debt that was the subject of the garnishment order is included in the debt discharged by bankruptcy, the garnishment cannot be resumed. If you have additional questions, call us at 859-254-5522.

What is the maximum amount that can be garnished from a paycheck?

Generally, the maximum amount is 15-25% of disposable earnings.

Under the Consumer Credit Protection Act, the amount that is withheld each week cannot be more than 25% of the worker’s disposable earnings or the amount by which disposable earnings are greater than 30 times the federal minimum wage, whichever is less. At today’s federal minimum wage of $7.25 an hour, that means an employee who earns $290 or more in weekly disposable income can have 25% taken, while an employee who earns $217.50 or less cannot be subjected to garnishment. An employee who earns between those two amounts can have the amount above $217.50 taken.

These limits apply only to consumer debt, such as for personal loans, credit cards, and medical bills. Federal law allows 15% of weekly disposable income to be garnished for repayment of federal student loans, around 15% for tax debt, and as much as 60% unless the worker is supporting another child or a spouse. While some states have enacted wage attachment laws that provide additional protections or exemptions, Kentucky’s laws mirror those of the federal government.

If a worker is subject to more than one garnishment, the total garnishable amount is limited to 25%. For example, if your income is already being garnished by 15% to repay back taxes and you receive another garnishment order, the second creditor can be sent only 10% of your income. Although it might be tempting for some employers to terminate employees rather than jump through the hoops that come with garnishment, one wage garnishment order is not a legal basis for dismissal. However, neither federal law nor Kentucky law provides protection to employees with more than one.

How can I stop wage garnishment?

Filing an emergency petition for bankruptcy will stop the immediate garnishment and could help you in a number of ways. Filing for bankruptcy can help you repair your credit and get things moving in the right direction. Once the bankruptcy is filed, it is important to review your credit report 30 days after receiving the discharge. Your negative credit history is being updated, but you now have a chance to rebuild and do things the right way. If your attorney sees some items that have not been discharged, it can be disputed and will help your credit score continue to rise over time.

Is This the Only Option?

For many, yes. If you are in a situation where your funds are about to be or have been garnished, filing for an emergency bankruptcy will probably be one of the only solutions that can grant you immediate relief and allow you to keep the funds you need to live on. Although bankruptcy may sound scary, it could be one of the best moves you can make for your immediate future. No one wants to have creditors hanging over their head for the rest of their life – this can give you a clean slate. Regardless of why you are in the situation, this could provide peace of mind.

Look for a Positive Future

The Fayette County garnishment attorneys at Bunch & Brock are familiar with every aspect of debtor and creditor issues, including wage garnishment. We are a debt relief firm committed to providing each of our clients with personal attention and real solutions to financial troubles. We understand that circumstances exist that can result in financial problems for even the most conscientious of people.

Based in Lexington, KY, our wage garnishment lawyers can help you protect your rights and be your first line of defense. Each person’s situation has a unique set of facts, and the best course of action varies, depending on a number of factors. As a bankruptcy law firm with more than 35 years of experience in the state of Kentucky, we have effectively represented many people who were in the same position you are in now. We are dedicated to providing each of our clients with a high level of personal service and effective counsel. Contact us today by calling 859-254-5522.