Stop Wage, Bank Account, or Tax Refund Garnishment Fast!
Garnishments Stop Upon Filing!
Garnishments must cease immediately upon the filing of a Chapter 7 or Chapter 13 bankruptcy petition due to the “Automatic Stay Against Collections” that clicks into place the moment the petition is filed. The automatic stay is a sort of master injunction under Federal law that requires all creditors to cease any activity that constitutes the collection of a debt: telephone-calls, letters, lawsuits, lien perfection, foreclosures, repossessions and seizures of property—and garnishment of wages, bank accounts, and Michigan state tax refunds.
Stopping a garnishment is one of the most common reasons for the filing of a Chapter 7 or Chapter 13 bankruptcy. And stopping garnishments is one of the most immediate benefits of a bankruptcy filing.
Why does this automatic stay stop garnishment?
A garnishment is a means of collecting upon a judgment award in a lawsuit. There are other means, but, if a person who has had a judgment awarded against him or her is employed, paying taxes, depositing money into a bank, a garnishment is the most hassle-free means of getting paid for the party holding the judgment. A typical collections lawsuit originating from a credit card or medical debt is usually handled here in the Detroit area of Michigan by one of a handful of “usual suspect” creditor collections “law firms” which operate according to a sort of standard operating procedure. Requesting a garnishment from the court awarding the judgment is the first post-judgment step these “law firms” will take.
However, all such collections lawsuits are based upon claims rooted in Michigan state or other state law. Contract law, for the most part, is a matter of state law, not Federal law. An application for a credit card or any other kind of greement you might sign to accept credit or have a service provided is governed by state contract law.
Bankruptcy, however, is Federal law. What that means is that the Federal law of bankruptcy preempts creditors’ claims rooted in state contract law. That is, it “overrules” it. The bankruptcy automatic stay against collections and, eventually, when the Chapter 7 or Chapter 13 case is completed, the bankruptcy discharge completely closes the creditor’s ability to pursue a garnishment or other collection against you under state law–and even requires the state court issuing the judgment to administratively close the collections case down completely.
But it gets better.
Creditors must return garnishment funds taken from you!
Not only does a Chapter 7 or Chapter 13 bankruptcy filing stop a garnishment but it even can require that the creditor garnishing your funds return some or all of them.
All funds taken from you by way of a garnishment within the 90 days prior to the filing of your bankruptcy case must be returned to you after you file so long as the amount garnished is $600 or more, and so long as you are able to exempt (“protect”) your claim to the funds along with your other assets in your bankruptcy schedules.
If a creditor garnishes $599 from you, therefore, they need not be returned. If $601 is garnished, it must be returned, so long as it was taken within the 90 day pre-filing “preference” period. If $10,000,000 is garnished from you in that 90-day period, it must all be returned, furthermore, not only the $600.
Stopping a Garnishment: Timing Is Everything
Thus, a bankruptcy filing, if you are being garnished, should be considered as a potential option for its effectiveness in stopping the garnishment, but it should be considered in a time-efficient manner. If you wait 91 days past the date that a significant amount of money is garnished from you, it may be too late to recover the funds with a Chapter 7 or Chapter 13 bankruptcy filing, although the filing will stop future or ongoing garnishment. Michigan bankruptcy attorney John Hilla has often managed to retrieve funds for clients who have suffered garnishment in excess of the fees paid for the actual bankruptcy service. It can pay to think quickly!
If you are suffering from an income loss due to garnishment or will soon have your wages or other incoming funds garnished, please contact us at (866) 674-2317 or click the button below to schedule a free, initial consultation.