If you've found yourself in a tough financial situation, having money withheld from your paycheck may be the last thing you want.
Wage garnishment is when a creditor gets permission from the courts to have money withheld from your paycheck, or withdrawn from your bank account, in order to pay off your debt.
If you're concerned about your wages being garnished, you need to act quickly. Why the rush? Once wages have been withheld from your paycheck you probably won't be able to recover the money. So it's best to look into alternatives, like filing a Transverse of Garnishment, settling the debt in a lump sum payment, or possibly filing bankruptcy, before the money starts disappearing.
Filing Bankruptcy to Stop Wage Garnishment
One of the effects of filing bankruptcy, either Chapter 13 or Chapter 7, is that all actions to collect a debt are immediately halted. This is called an “automatic stay.” So if you're able to move quickly you may be able to avoid having funds withheld from your paycheck or removed from your bank account (a bank levy).
If the garnishment order has already been served to your employer you may need to inform your payroll manager that you have filed bankruptcy to stop the garnishment.
If you are able to file Chapter 7 bankruptcy, you may find true debt relief.
The FI FA Trap
Too often, those who have found refuge in filing bankruptcy later find themselves plunged back under water when they go to sell their house or car. That's because one of their creditors was granted a Fi Fa before they filed for bankruptcy.
A Fi Fa (writ of fieri facias) essentially places a lien on your property that comes into play only if try you sell it.
So let's say that five years ago your debts were discharged through a Chapter 13 or Chapter 7 bankruptcy. You've worked hard, rebuilt your savings, and re-established your credit. Now the market is hot and you want to sell your home. But when you go to sell it you learn that $20,000 of your proceeds will go to the creditor.
Suddenly you find that the creditors bankruptcy protected you from are coming after you once again.
If you have fallen hopelessly behind you can avoid this costly trap by moving quickly to file bankruptcy.
The act of filing for bankruptcy prevents creditors from filing for a FiFa, or even contacting you. But again, if they are granted the action first your protection under bankruptcy is diminished.
Filing a Traverse of Garnishment
If you believe that you have a legal reason to not have your wages garnished you can file a Traverse of Garnishment.
Although it's not common, a traverse might be successful if:
- The bank account being garnished doesn't belong to you
- The bank account is joint account, and the funds can be proved to belong to the other owner
- The bank account funds are from social security income that is exempt
- You were never served notice of the garnishment
You should keep in mind that your wages will continue to be garnished while the Traverse is being considered.