Wage Garnishment and Bankruptcy
The good thing about bankruptcy law is that my clients usually know they’re in financial trouble, and they proceed with relieving themselves of debt on their schedule. However, this field does have its own emergency situations. Perhaps the most prominent is a wage garnishment taking effect. A wage garnishment is a deduction from paycheck earnings, leaving only a minimal amount for debtor living expenses. Once a Bankruptcy petition is filed wage garnishment does not take effect. Of course, this rule has exceptions in the case of loans that cannot be discharged (e.g. student loans).
I recently assisted a client with a Chapter 7 Bankruptcy, who already had his pay garnished and faced the prospect of his next biweekly paycheck having a further garnishment amount deducted and being left with a minimal amount for living expenses. The good news is that this situation is exceptional mainly because of its timing. Rarely does an outstanding debt accelerate to wage garnishment without the debtor taking some preventative action.
An ordinary unsecured credit account balance begins to accrue penalties and interest and is terminated by the creditor after an extended period of time without payments received. Usually the debts are written off and sold to collection agencies. If settlement via a repayment plan is futile, the account is then passed on to law offices who make their own collection attempts before filing suit. Any debtor named as a defendant in a lawsuit needs to be served personally at their current address or by publication in the area of their last known address. Only if the defendant having been served then fails to answer can the company filing suit obtain a judgment by default. An order of judgment is required in order to obtain any attachment on a debtor’s property or garnishment of their wages. Threats to do so should be taken seriously but with the understanding that the entire process needs to take its full course.
You should speak with an attorney in your jurisdiction when an outstanding debt has gone as far as a wage garnishment threat. Filing for bankruptcy is never easy especially in cases when the individual facing bankruptcy might have other simultaneous legal issues such as divorce. The important thing is to talk to an attorney as soon as possible as wage garnishment does and will happen if proper action is not taken.
