One of the primary reasons I get calls at my Clayton County, Georgia bankruptcy attorney office is from debtors who have just been garnished by creditors. The debtors are seeing their paycheck or their bank account garnished and they want to stop it.
Bankruptcy is a way debtors can stop garnishments, presuming they have the benefit of the automatic stay. The automatic stay stops creditor actions including garnishments.
Upon the filing of the bankruptcy case, the debtor or the debtor’s attorney can notify their HR department and the garnishment should stop immediately, whether the debtor filed Chapter 7 or Chapter 13 bankruptcy. The garnishment stops and allows the debtor to resume receiving normal paychecks.
However, in addition to stopping the ongoing garnishment, the debtor might have the opportunity to recover the funds that were garnished in the 90 days preceding the filing. If the amount of money garnished in the 90 days preceding the filing is greater than $600, that transfer can be avoided under 11 USC 547 for the benefit of the debtor’s bankruptcy estate.
The debtors bankruptcy estate could be comprised of assets that the debtor can keep entirely. If the debtor has the ability to exempt the garnished money. the debtor can keep the garnished sums of over $600 in the 90 days preceding filing. If however, the debtor does not have any exemptions for this garnishment, only the trustee can recover the money.
Whether the debtor is entitled to the money or not, the debtor or the trustee, still needs to get the money from the creditor. Sometimes the creditors is unwilling to return the money. If the creditor is unwilling to return the money, the debtor can succeed can sue the creditor for the return of the money and what’s called an adversary proceedingn and also request attorneys fees.
The debtor needs to locate and serve the creditor in such a scenario with a lawsuit, so the more ideal scenario is the debtor contacts the creditor, who returns the money to the debtor. That is the perfect scenario for the debtor, as the debtor is able to not only stop the ongoing garnishment, but also recover a lot of the money garnished that actually led to them filing bankruptcy.