What Happens To Garnishments?

If a civil suit has been filed, you will need to know what to look for in order to best protect your interests as their collection efforts move forward. When you are sued in civil court on a debt (if the process is followed correctly) you should first receive a Summons & a Complaint. The Summons will tell you when and where your hearing will be held (usually about a month after service) and your Complaint will tell you who is suing you and why (the Plaintiff is either the creditor or the collector who is suing you and the body of the Complaint will have the cause). Once the hearing has been held, there will be a judgment entered against you. A Judgment is a Court order stating that you legally owe the complained of debt to the Plaintiff and that the Plaintiff is legally entitled to pursue collections of that debt against you.

At some point after the judgment enters, the Plaintiff will return to the Court, with the Judgment, and can seek a Writ of Garnishment. A Writ of Garnishment can be used to seize either 25% of your net wages (the amount of wages that you actually take home) or they can serve the Writ of Garnishment upon your bank. When a Writ of Garnishment is served on your bank, the Plaintiff is entitled to take whatever is in your account at the time that the Writ of Garnishment is served on the bank. There are some types of income which are protected against this type of seizure (most notably Social Security, Disability and some Retirement Funds) but wages from working a job are not protected 100%.

When you file a bankruptcy, the day that your case is filed, the Bankruptcy Court judge assigned to your case will issue an Automatic Stay order which makes all collection activities (everything from phone calls, to Writs of Garnishment, to Foreclosures) illegal. All collection activities must stop as of the moment that the Automatic Stay Order is issued by your bankruptcy judge.

If you do not believe that your bankruptcy can be filed before a Judgment or a Writ of Garnishment will be entered, you need to take steps to protect your funds from seizure. If you know that a Judgment has entered against you, you will not receive any additional warning before a Writ of Garnishment is served on your bank, if your creditor intends to serve one. If Plaintiffs (creditors) were required to provide warning, then everyone would simply remove their funds before the Garnishment went into effect. So once you have a Judgment against you, you will not receive any additional warning if a Bank Garnishment is sought by your Plaintiff. The best thing that you can do to protect yourself, is to simply not have any of your money in bank account on which your name appears – in any fashion. Any bank account where your name appears, in any fashion, can be subject to a Bank Garnishment.

Years ago, we used to have everyone stop their automatic deposits of pay checks and live on a cash basis for the months prior to filing a bankruptcy. In today’s world, with required automatic deposits and virtually every bill available for online bill-pay, this is not nearly as practical as it was in the past. Regardless of inconvenience, draining your bank accounts and using cash, money orders, and cashier’s checks is the only way to truly avoid the potentially devastating effects of a Bank Garnishment. The day after your bankruptcy is filed, you can return to using your bank accounts like normal, but until that time, any money left sitting in a bank account is a game of Russian roulette.

Wage Garnishments are a different matter in terms of practicality. You can’t exactly turn off your wages however, you are supposed to receive notice from your employer if your employer is served with a Wage Garnishment. In many cases, we have been able to get a client filed between the time that their employer was served with a Writ of Garnishment and when that Writ of Garnishment went into effect and seized 25% of their net wages. Because of the extremely limited time-frame that this involves, we are usually only successful in those cases where our clients have already prepared themselves and gotten all of their documentation in line prior to getting notice that a Writ of Garnishment had been served on their employer. Preparation and planning is paramount to your ability to protect your wages through a bankruptcy filing.

A phenomena that we have noticed over the last couple of years is the amount of cooperation or data sharing which seems to be going on between creditors. If one creditor has successfully served you, then it usually will seem like everyone knows how to serve you all of a sudden. In many instances, once one creditor has served you, you will start to receive many civil suits within a month or two of the original service. As the damage increases, it also seems as if the data sharing increases. Once one creditor has obtained a judgment against you, then you almost always will receive additional service from other creditors. The largest trigger for additional civil suits seems to be when one creditor is able to receive some satisfaction for their judgment – when one of them actually gets money from you through a Wage or Bank Garnishment. Once one creditor (now a Plaintiff) obtains money from you, it is usually just a matter of time before several other creditors will jump on the bandwagon and begin to file their own civil suits.

The only saving grace to this phenomenon of multiple suits is that only one creditor can garnish your wages at a time, but that does not mean that one creditor cannot garnish your wages while another creditor garnishes your bank accounts. It also does not mean that while one creditor is garnishing your wages that the same creditor will not also garnish your bank accounts. I’ve seen it happen several times where a client goes back to using their bank accounts like normal after receiving a wage garnishment, against legal advice, assuming that since their wages are being garnished they cannot not also have their bank accounts garnished. This simply is not true. Your bank accounts are just as susceptible to garnishment when your wages are being garnished as they are at any other time. While this is a fairly rare occurrence, it does happen and when it happens, the effects are so devastating that you should protect yourself from it as best as you can. While one creditor is garnishing your wages, it is true that most other creditors cannot also garnish your wages in addition and at the same time. That doesn’t mean that they go away. Quite to the contrary, the additional Writs of Garnishment, from additional creditors, will simply wait their turn to garnish you after the original Writ of Garnishment has run its course.

Writs of Garnishment are good for six months. Once the initial six months are finished, the creditor will generally renew the Writ of Garnishment until the judgment is satisfied. Because there are “breaks” in the garnishment, these “breaks” encourage other creditors with Writs of Garnishment to aggressively try to sneak in when the former Writ of Garnishment expires. They are hoping that the original Writ of Garnishment will expire by a couple of days which may allow them to sneak into the original Writ’s place and then they can claim 25% of your wages for the following six months. Because of this trend to stack garnishments, it is imperative that you file your bankruptcy as soon as humanly possible once you know of the possibility of a Writ of Garnishment being entered against you.

The earliest sign that a Writ of Garnishment is possible is when you are served with the Summon & Complaint. About three years ago, approximately 10%-15% of the cases that we filed either had active garnishments or the potential for imminent garnishment. Today, about 90% of the bankruptcies that we file have either active or imminent garnishments. Why the difference? As the economy slowed, collectors found that they simply could not get funds form people, who had no funds to give, by only calling and harassing them. There’s an old saying, “You can’t get blood from a stone.” Well, unfortunately there is an old lawyer joke to this saying. When a lawyer was told this clever saying the lawyer responded, “Ya, but you can get the stone.” When a collector calls and harasses you to make a payment on a debt, you still have an element of choice – you, in the end, decide whether to send the payment to the collector or not. When a civil suit is filed, a judgment is obtained, and a Writ of Garnishment is issued, you have no choice in the matter. It simply does not matter if the money that they seize was earmarked for mortgage/rent, groceries, or medicine. The money will be taken to the limits prescribed by law. Since we are many years now into a recession where many have not had the opportunity to make payments towards their bills, many creditors have resorted to civil suits much earlier than they previously would have resorted. As a result, you are seeing many more civil suits being filed to collect on debts, much faster than at any other time in collection history.

The worst case scenario to a Writ of Garnishment, is that you are trying to file a bankruptcy while being actively garnished. The Court has made it very clear to those of us who practice in our field of law that we must not take payments for chapter 7 bankruptcies after those cases have been filed with the Court. The same Automatic Stay Order which prevents your collectors from garnishing you also knocks out our representation contracts with you. Where we to accept your voluntary payment of fees after your case is filed, we would be accepting payment on a contract that no longer exists. This is a very quick way for an attorney to get into hot water. Attorneys, all good lawyer jokes aside, are held to a higher legal and ethical standard according to the Professional Rules of Conduct. An attorney can face significant penalties for the type of ethical violation that would be committed if they were to accept fees on a contract that had been nullified. So no matter how much we may want to accept fees after filing, to help someone out, we cannot do this and protect ourselves.

So what are you to do? In most cases, we meet our clients before the Writ of Garnishment has gone into effect. So in general, we have time to help them before they are trying to pay our fees and a Writ of Garnishment at the same time (an almost impossible task). The first and best thing to do is to treat the garnishment as if it were going to happen tomorrow before you ever hear of it. If a creditor has taken the time, and quite frankly the expense, to have served and sued you, then you must reason that they have done this for a reason. They are not simply going to go away after having invested so much time, money and effort. Do everything that you can today to avoid having to do the same after you have already begun to be garnished. An ounce of prevention, in this instance, is truly worth a pound of cure.

In the real world, things do not always work out this well. Expenses come up and things happen that will inevitably take priority, at the time, over getting your bankruptcy filed. If you have found yourself in a position where you are actively being garnished, and the garnishment is going to seriously impair your ability to pay for housing, food, medicine, or other necessities of life, then you are going to have to seek assistance. We all have to at some point in our lives. Because it is very likely these days that the garnishment that you are currently staring down will not be the last, you need to stop the hemorrhaging of cash as soon as it is practical. This might mean that you borrow money from friends or relatives, from your retirement, or even form a commercial lender to get your bankruptcy filed. While any debts that are taken out within this close of a proximity to your filing can be denied discharge, these debts, when they are rarely challenged, are usually settled for about half of their value and then set up on installment plans to be repaid. Most of my clients who have gone this route to get filed, have voluntarily repaid their loans out of a very understandable sense of “thanks” for lending them the assistance that they gravely needed at the time. While this is not an ideal solution, it is usually a short-term bitter pill that can avoid a domino effect of devastation in our clients’ lives.

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