How Soon After I’ve Been Garnished Can I File Bankruptcy?

garnishmentWhen a creditor sues a debtor and get a judgment, the creditor (now judgment creditor) will try to collect from the debtor (now judgment debtor) by way of garnishment.

Garnishment is a legal procedure by which the judgment creditor is able to compel a party that owes money to the judgment debtor, to pay some or all of that money to the judgment creditor instead.

A common question when a judgment debtor is garnished is how to stop the garnishment?  Although there are statutory limits to how much of a judgment debtor’s wages can be garnished, the reduction in take-home pay caused by garnishment can put a dent in the judgment debtor’s ability to afford the basic necessities.

Bankruptcy is one way to stop garnishment.  Bankruptcy works by discharging the underlying obligation and enjoining any further effort to collect on the debt, by garnishment or by others methods.

Some judgment debtors believe that they must wait a certain minimum time after the start of garnishment before they can file for bankruptcy.   That’s a misconception —   there is no required waiting period for filing for bankruptcy after the start of garnishment.  There may be other considerations affecting the optimal time to file, but there is statutory waiting period associated with garnishment.

If you’re being garnished and would like to stop the process through the use of bankruptcy, drop us a line at tzink@mccarthyfingar.com.

ATTORNEY ADVERTISING — PAST RESULTS DO NOT GUARANTEE FUTURE OUTCOMES

We are a debt relief agency, we help people file for Bankruptcy under the Bankruptcy Code. This Blog is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney-client relationship between you and the Blog publisher. The Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

HOW TO DEAL WITH A WAGE GARNISHMENT

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Garnishments, Generally

If a creditor sues you and gets a judgment against you, the creditor (now a “judgment creditor”) can recover the judgment amount by “garnishing” your wages and/or seizing certain property.  In New York, garnishment is more officially known as “income execution.”

Garnishment Process

In practice, the creditor secures an order for income execution and serves it upon your employer.  The employer then is required to deduct a certain portion of your wages each pay period and remit the withheld amount to the sheriff or marshal or other court official, who in turn transfers the moneys to the judgment creditor.  The process continues until the amount of the judgment is paid in full or “satisfied,” or you cease to be employed.

What to Do if Your Wages are Being Garnished?

What can you do if your wages are being garnished or subject to income execution?

Each situation is different and the wage earner may be well served to confer with an attorney to consider all options, but here is a non-exhaustive list of certain considerations if you become subject to wage garnishment:

  1. Is the underlying judgment valid? You may be able to get the judgment vacated (set aside) if the judgment was obtained without appropriate due process protections.
  2. Has the judgment already been satisfied by previous payments made in the ordinary course or pursuant to a settlement with the creditor or collection agency? 
  3. Has the judgment creditor given you appropriate credit for all prior payments made?
  4. Is the amount being garnished excessive in light of your gross pay and available exemptions?  Various federal and state laws limit the amount of garnishments during any particular pay period.  Make sure the amount does not exceed the appropriate amount.
  5. Are you already being garnished by another creditor?  Multi-creditor garnishments may be prohibited in certain circumstances, particularly if applicable federal and state law limits have been exceeded.
  6. Can you pay the judgment creditor a discounted amount of the judgment in the form of a lump sum in exchange for a full release?
  7. Can you negotiate a payment plan with the judgment creditor to avoid wage garnishment, in exchange for a promise by the creditor to forbear from further garnishments and collection activity?  It may be difficult to persuade a judgment creditor to rely on your promise to pay, when the judgment creditor can reasonably rely on the garnishment process.
  8. Is bankruptcy an option?  Bankruptcy will stop a wage garnishment in its tracks and generally results in a discharge of the underlying judgment and a perpetual ban on further garnishments and collection efforts.

If you learn you are being garnished, keep calm and work your way through the foregoing considerations.

ATTORNEY ADVERTISING — PAST RESULTS DO NOT GUARANTEE FUTURE OUTCOMES

We are a debt relief agency, we help people file for Bankruptcy under the Bankruptcy Code. This Blog is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney-client relationship between you and the Blog publisher. The Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

 

 

 

My Car Was Repossessed; Can the Car Lender Come After Me for More?

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If you get behind on car loan payments, the lender will likely come after the car through a so-called “self-help” remedy called “repossession.”  Once the lender has your car, it will sell the car at auction.  The proceeds received at auction, minus the costs of repossession and sale, will be applied to your loan balance.

If the net amount received at auction is less than what you owe on the car loan, the lender will have a “deficiency claim” against you.  The lender will generally demand you pay the deficiency, and sue you to recover the deficiency claim if you don’t pay.

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If the lender does sue you to collect the deficiency claim, the lender must serve you with the complaint and a summons.  The complaint will set forth facts relating to the loan, the default in payment on the loan, the repossession, the auction, and the resulting deficiency.  The summons commands you to appear at a date and time certain to answer the complaint.  Failure to respond appropriately to the summons and complaint can lead to a default judgment against you.

Once the lender has a judgment for the deficiency claim, the lender can execute on the judgment.  Judgment executions can take many forms, but usually involve wage garnishments and levies on your bank accounts.  Wage garnishments and levies can put you in a position where you are unable to pay other creditors, leading to a downward spiral of potentially increasing intensity.  It is at this point that many consumers think of filing for bankruptcy protection.  Bankruptcy can eliminate deficiency claims and block garnishments and levies.

Send me an email if you would like additional written information on how bankruptcy can protect you against deficiency claims and garnishments.

ATTORNEY ADVERTISING — PAST RESULTS DO NOT GUARANTEE FUTURE OUTCOMES

We are a debt relief agency, we help people file for Bankruptcy under the Bankruptcy Code. This Blog is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney-client relationship between you and the Blog publisher. The Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

What Can I Do to Stop a Wage Garnishment?

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You work hard for your money and you are barely able to make ends meet. A creditor has obtained a judgment against you and has begun garnishing your wages. Money that you need for your kid’s dentists visits and other important purposes is being withdrawn from your pay before you even get it. What can you do to stop the garnishment?

There are generally 4 things one can do to stop a garnishment.

  1. Pay off the judgment in full in exchange for a written release and an acknowledgment by the creditor that the judgment has been fully satisfied. This option, although “neat and tidy,” may be unrealistic if you don’t have the money to satisfy the judgment.
  2. Negotiate a settlement or reduced amount and pay that in a lump sum or over time. This option may not be realistic because the creditor may have little or no incentive to negotiate a compromise with you. Remember, the best time to negotiate a reduced payoff amount is before the creditor gets a judgment.
  3. Quit your job so that there are no wages to garnish. This option may fall within the “cut off your nose to spite your face” category — a needlessly self-destructive over-reaction to the problem.
  4. You could file for bankruptcy protection, get a discharge of the underlying judgment, and stop the garnishment permanently. Bankruptcy is a big step and requires consideration of a lot of different factors that should be considered in consultation with a competent legal advisor.

If your wages are being garnished and you would like to explore your options, call my office at 914-385-1032 to schedule a free 30-minute consultation.

ATTORNEY ADVERTISING — PAST RESULTS DO NOT GUARANTEE FUTURE OUTCOMES

We are a debt relief agency, we help people file for Bankruptcy under the Bankruptcy Code. This Blog is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney-client relationship between you and the Blog publisher. The Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

WHY DO MY CREDITORS SUE ME FOR A JUDGMENT? I HAVE NO ASSETS.

debtA question often asked is why creditors insist on suing to collect unpaid debt even when the debtor has no assets to satisfy the resulting judgment.  I can think of at least two reasons.

First, a judgment is good for 20 years in New York.  That means that the creditor, or “judgment creditor” once a judgment has been entered, has 20 years from the entry of the judgment to collect (or “execute”) on the judgment.  Who knows what might happen in a span of time that long?  It’s entirely possible that the judgment debtor (the debtor after a judgment has been entered) may begin to assemble valuable assets through higher earnings power, significant gifts, an inheritance, the receipt of life insurance, or a judgment in favor of the judgment debtor.  Creditors can afford to think long-term and just because you are presently collection-proof does not mean that you always will be.

Second, you may not have assets, but you are likely to have a job (or in the future will get a job) that pays you wages that can be garnished periodically by the judgment creditor.  This collection process is called “income execution” in New York.  Again, creditors can take the long view and can afford to be patient as they collect methodically and periodically through garnishment.

In short, just because you don’t have any assets now does not mean creditors will go away.  You can make creditors go away by filing and successfully administering a bankruptcy case.

If you would like to discuss how bankruptcy might work for you fill out the form below, hit “Submit” and I will send you a free copy of my article “What Are the Advantages and Disadvantages of Filing for Bankruptcy Protection under Chapter 7 of the Bankruptcy Code?”

ATTORNEY ADVERTISING — PAST RESULTS DO NOT GUARANTEE FUTURE OUTCOMES