Filing Bankruptcy Can Stop Your Wage Garnishments

Garnished wages are something no one wants to deal with, especially when a too-tight budget makes living paycheck to paycheck a common occurrence.  However, if you find yourself in this situation, it is important to know that filing bankruptcy stops all garnishments except domestic support obligations such as child support and alimony.

When a bankruptcy is filed, an automatic stay is created. An automatic stay is a term that is used in bankruptcy to denote an automatic stop to all garnishments and collection efforts when the bankruptcy is filed.  A creditor can petition the court to allow them to resume collection efforts after an automatic stay has been placed, but must have a valid reason for submitting this request.  In most cases, the court will not allow collection efforts to resume.  Exceptions to this, however, are domestic support obligations such as child support and alimony.

The automatic stay is officially over when the bankruptcy is discharged or dismissed.  In a discharge, the creditor to whom you owed the money will likely be included in the discharge, so the garnishment will not continue.

If your wages were garnished prior to filing bankruptcy, there are ways that you and ensure the garnishment stops as quickly as possible.  First, you should give a written notice of the bankruptcy filing to the payroll department of the company for which you work.  If the wage garnishment was handled by the local sheriff’s office, you should notify that office, as well.

 

In some cases, you might qualify for a return of the garnished wages.  To qualify for this, the garnished wages must have been over $600 and you must have had enough exemptions applied in your bankruptcy to cover the amount.  This must occur within 90 days of your bankruptcy filing.  As tough as your current situation may be, imagine if you suddenly received 25% less!  That’s what a garnishment can do and the most effective way to stop it is to file a bankruptcy.

Will I Be Able to Rent a House or Apartment if I File for Bankruptcy?

In today’s current economic climate, many people are forced to rent due to losing their homes in foreclosure and not having the credit or means to buy another house.  This means that rental property is really the only option for many households and landlords understand that.  People with perfect credit are more likely to be taking advantage of the great deals in the housing market right now due to short sells and bank-owned properties, so that leaves people with less-than-perfect credit to apply for most of the rental property available.  Landlords know this, so the good news is that bankruptcy will likely help your chances of renting more than hurt your chances.

As long as your bankruptcy has been completely discharged, your landlord will likely concentrate on the credit you’ve used after filing.  Your landlord will also recognize the fact that now that your debts have been discharged, you will likely have more cash flow to pay your rent and other living expenses.  This is a plus for him or her in assuring that money will be paid on time. 

One thing to keep in mind—whether you have filed bankruptcy or not—is that you should not attempt to rent if the amount is more than 30% of your gross income.  Keeping your search to one that is in the range of housing you can afford will be crucial to getting approved as a renter.  Another thing to keep in mind is that honesty regarding your financial past, including the details relating to your bankruptcy, will be important in your agreement with a landlord.  If you honestly explain the situation that led to your bankruptcy and are able to show how well you have handled your financial affairs post-bankruptcy, many landlords will work with you to make sure you have a home to live in. 

What will happen to my car loan if I file Chapter 7 bankruptcy?

I’m Retired and in Debt: Does Bankruptcy Make Sense?

A comfortable and peaceful retirement is part of the “American Dream,” but an increasing number of seniors in the U.S. are finding themselves burdened with too much debt, whether from medical bills or simply several years of unwise financial decisions.  This is leading to the question: does bankruptcy in retirement make sense? 

There are some important issues to look at if you are at a retirement age and considering bankruptcy—issues that are unique to you due to your retirement plans and age.  First of all, it is important to know that your Social Security wages cannot be garnished, whether you file for bankruptcy or not.  However, many creditors will garnish a bank account, which means that if you keep your Social Security wages in your bank account, along with any other money earned, a creditor isn’t likely to know how much of that account’s balance is from Social Security wages.  Therefore, keeping your Social Security wages in a separate account is crucial to maintaining this protection. 

However, if you have a large pension, you will be unlikely to qualify for Chapter 7 bankruptcy.  This means that you will be stuck with filing Chapter 13, which requires you to pay back a certain amount each month.  Since many seniors are on a very set income and often lack the extra money each month to pay such payments, Chapter 13 might not be the best option if it will make it difficult for them to take care of their basic, day-to-day living expenses AND make these payments on a set income. 

If you have an IRA with a significant amount of money, it is important to check with a bankruptcy attorney to see how that account would be affected after filing for bankruptcy.  Since bankruptcy laws and exemptions vary within each state, you might be advised that you are better off not filing or risk losing a large portion of your IRA.  In Florida, most cases allow you to keep 100% of your IRA or 401k regardless of the amount.

I've lost my home in a foreclosure and can't qualify for another mortgage. Will I be able to rent a house or apartment if I file for bankruptcy?

What Happens to My Car Loans in a Bankruptcy?

Anyone who is considering bankruptcy will likely be concerned about its effect it will have on car loans, since such loans are considered secured loans, with the vehicle as collateral.  Most states have bankruptcy exemptions that allow you to keep your vehicle, but the amounts vary from state to state.  So how do you know what will happen to your car before you make the choice to file?

Regardless of whether you file Chapter 7 bankruptcy or Chapter 13 bankruptcy, there will be an “automatic stay” that applies and prevents debt collection attempts, lawsuits, foreclosures, wage garnishments and repossessions until the court determines the outcome of your bankruptcy filing.  How the courts will handle your car loan depends on the type of bankruptcy you file. 

If you file Chapter 7 bankruptcy, your car loan will be considered secured debt and you essentially have two options.  You can reaffirm it, which means you will continue making payments as normal.  Same interest rate, same payments, same time. Or, you can surrender it, which means you give the car back and have the remainder of the amount owed on the car (after the car is sold through auction) discharged through the bankruptcy filing.  

If you file Chapter 13 bankruptcy and your car is a newer car (meaning you bought it within 910 days of the date in which you filed bankruptcy), you are required to pay the amount of the loan, although it might be possible to get your interest rate reduced.  If your car is an older car (meaning you purchased it more than 910 days before filing for bankruptcy), you will only be required to pay the car’s current market value.  This is a useful tool for people who had bad credit and consequently have been paying for years at an obscene interest rate.