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Wage Garnishment in Bankruptcy

What is Wage Garnishment?

Wage garnishment, or garnishment for short, is one of the remedies a creditor can use to “satisfy” or get paid on a judgment. Ordinarily, a creditor can get an order of garnishment (a “writ”) only after obtaining a judgment against you. The garnishment writ will be served on your employer and will direct the employer to take money out of your paycheck to be applied to the judgment. The sheriff will serve the writ on your employer, who will be required to hold back a portion of your wages each pay period and send that amount to the creditor.

Image Source (CC BY 2.0) by lendingmemo via flickr

Image Source (CC BY 2.0) by lendingmemo via flickr

Limits on Wage Garnishment (Head of Family & Non-Head)

There are limits to how much a creditor can garnish from your paycheck each month. You may also be able to protect your wages by using “exemptions”. Under Florida law, you are allowed to protect (“exempt”) your earnings completely if you are the head of family. Florida Law, in 221.11 FS defines “earnings” as compensation paid or payable for personal services or labor whether denominated as wages, salary, commission, or bonuses.

To have your earnings determined to be exempt, you must file an affidavit with the court to prove that you are the head of a household. To qualify as head of family, you must provide more than 50% of the support for a child or other dependent.  Even if you are not a head of family, Florida Law states that creditors cannot garnish more than 25% of your wages or the amount that exceeds thirty times the minimum wage, whichever is less.

Garnishment Without A Court Order

If you owe child support, student loans, or taxes, your wages can be garnished even without a prior court order. Depending on whether you have other dependents and how far behind you are on support, between 55%- 65% of your wages can be garnished to pay child support. Up to 15% of your disposable income can be garnished to pay student loans that are in default. The amount that can be garnished for taxes owed is determined by the number of your dependents and your tax rate.

The Effect of Filing Bankruptcy

Chapter 7 and Chapter 13 bankruptcy filings will help you to deal with debts from credit cards, personal loans, medical bills and most other types of unsecured debts. Even some types of unpaid tax debt can be discharged in Chapter 7 or a Chapter 13 bankruptcy. This means if your wages are being garnished for any of these types of debts, the wage garnishment will stop when your automatic stay goes into effect.

Automatic Stays

If you file for bankruptcy protection an “automatic stay” comes into effect. The stay prevents a creditor from taking any action to collect on or satisfy a judgment, including garnishment during your bankruptcy case. Your employer will receive a notice from the bankruptcy court, the creditor or from you advising that a bankruptcy has been filed and the automatic stay is in effect, preventing future garnishment deductions. The automatic stay ends when your bankruptcy case ends. However, if you receive a discharge on the underlying obligation for the wage garnishment (such as credit card debt), the creditor can no longer take any action, including garnishment, to collect the debt.

Domestic Support Obligations

Child support and spousal support (alimony) are exceptions to the automatic stay and will not be stopped by the bankruptcy filing. These are considered priority debts that are unaffected by the automatic stay and cannot be discharged by filing bankruptcy. So if your wages are being garnished to satisfy domestic support obligations, the garnishment will not stop if you file bankruptcy.

Recovering Garnished Wages After Filing Bankruptcy

If you file a bankruptcy case shortly after garnishment has occurred, you may be able to get back all or a portion of amounts paid by your employer under the garnishment order. . You can usually get back wages garnished within the 90-day prior to your bankruptcy filing if they were over $600 in aggregate and you have enough “exemptions” (the amount of assets you can keep in a bankruptcy free of creditors claims) to cover them.

Effect of Previous Bankruptcy Filings

If you previously filed for bankruptcy and the case was dismissed within one year of your current filing, the stay will last for only 30 days as opposed to the life of the case. You can ask the court to extend this time if you can prove that you made your second filing in good faith. If you previously filed for bankruptcy twice in the past year, the automatic stay will not apply unless you petition the court for the stay and show good cause.

Protecting Your Rights

If you are the subject of a wage garnishment or have been served a notice of an application for a garnishment, you should immediately consult with a qualified bankruptcy attorney to determine whether a bankruptcy filing is called for and what your remedies may be. Bankruptcy can also terminate attachments and other collection activities.  To learn more with a free consultation with experienced bankruptcy lawyers, call Hoffman, Larin & Agnetti, P.A. today or fill out the contact form on the right and one of our lawyers will be in touch ASAP.