Bankruptcy and Garnishments

SOUTHFIELD, MI, May 10, 2013

Bankruptcy may be able to help you if you find yourself in a situation where your wages, bank accounts or even your tax refunds are being garnished by a creditor.

The filing of a Bankruptcy case causes something known as "the automatic stay" to go into effect. The automatic stay is like a giant stop sign which tells your creditors...STOP! All collection efforts, including any types of garnishment, must cease.

Once your attorney files your bankruptcy case, he or she will contact the creditor to inform them that they must stop the garnishment. The attorney may also contact your payroll department to inform them of the bankruptcy and their need to cease honoring the garnishment. If the garnishment is on a bank account, your lawyer will call the bank. Therefore, it may be necessary for you to provide your attorney with telephone and fax numbers to your payroll department, bank, etc.

Many of my clients ask me if a bankruptcy will stop garnishments after they have already started. The answer is yes. The creditor must withdraw the garnishment no matter how long it has been in place.

Of course there are some exceptions to all of this. For example, bankruptcy will not stop child support or alimony deductions.

In some circumstances, the creditor may have to refund to you the money that they took before you filed your bankruptcy. If a creditor has garnished more than $600.00 from you within the 90 days before you file your bankruptcy case, you may be entitled to get that money back. This is known as "avoiding a preferential transfer."

Keep in mind that, while a garnishment may be detrimental to your financial situation, it may not be reason enough to file a bankruptcy. The decision to file a bankruptcy case requires careful consideration by you and your attorney. Many factors go into this decision. There are nonbankruptcy protections available to individuals who are facing garnishment. Your lawyer can advise you of these.

The bottom line is that if you are experiencing a garnishment, do not assume that you must simply live with it. Bankruptcy is an option that may save your hard earned money.

Website: www.go2warr.com