Without a doubt, one of the leading reasons I get calls from debtors as a Cumming bankruptcy attorney is they have just been garnished. Either they received a notice from their bank that it is withholding funds from their account or their employer notified them that it is withholding part of their paycheck.
The garnishment statute in Georgia is generally set out in OCGA 18-4-20. Basically what you need to know is that as a general rule, if your paycheck is being garnished, you are going to lose approximately 25% of your take home pay until the judgment is satisfied in full. If however it’s your bank account being garnished, you could lose everything in the account immediately, depending on the amount of the judgment. The creditor can garnish up to the full amount of the judgment.
Please note there are nuances and exceptions to both paycheck and bank garnishments (for example, social security is not subject to garnishment); however, this article will continue under the assumption the nuances do not apply in your case.
So how should you deal with a garnishment? There are four main ways to deal with a garnishment:
– Allow the garnishment to continue:
Why would you allow the garnishment to continue? The most logical reason is the amount being garnished is rather negligible. In other words, the amount of the judgment is very small, or the amount already taken was fairly small, and the debtor does not believe the creditor will be able to garnish again.
For example, if all $200 of your bank account was garnished and the judgment is for $10,000, the debtor might want to just let that happen and no longer deposit new funds into this account. Remember that this account is under a continual court order to turn over the funds to the creditor.
The problem however with this approach is there is still a large judgment outstanding, so the creditor might later garnish the debtor’s paycheck or find access to more funds in a different bank account.
If the judgment is small, the debtor does not have to worry about this scenario. Therefore, paying the small judgment through a garnishment is most likely preferable to filing bankruptcy to extinguish the debt.
– File a traverse of the garnishment in State Court:
Outside of filing bankruptcy, the only way the debtor is going to get a court order to stop the garnishment is to successfully contest it in State Court. The process in Georgia to do that is known as a traverse.
The problem with the traverse option is “Judge, I think they are taking too much of my money” is not a valid defense. A valid defense is that the underlying judgment was faulty. Perhaps the debtor was never served with the initial lawsuit and never had a chance to contest the matter.
There are unfortunately several problems with this approach. For starters, the traverse requires the debtor to contest the judgment first. That judgment was another court case entirely and perhaps even in a different part of the state. Thus, the debtor will be dealing with two court cases at the same time.
Additionally, unless the debtor wins the challenge, the garnishment will probably continue. For example, if the debtor merely opens up a challenge by filing a motion to overturn the judgment, that is probably not enough to get the judge in the garnishing court to stop the garnishment. The judge will probably just allow the garnishment to continue but prevent the creditor from accessing the garnished funds. In other words, the debtor will still probably not have access to his lost paycheck funds and will merely be preventing the creditor from getting those funds at that stage. This hardly solves the debtor’s immediate problem.
Finally, even though the debtor might have a valid defense to the judgment in that he was never served, that does not mean the debtor has a valid defense once proper service is perfected. Accordingly, the debtor might just be delaying the inevitable anyway.
So if there is a valid defense, and this particular debt is not enough to push the debtor into bankruptcy, a traverse is a solid option. However, what I often find is the debtor is interested in filing bankruptcy anyway. In those cases, it’s a fool’s errand to traverse a garnishment where the debtor can just stop it via the bankruptcy route anyway.
– Negotiate a release of garnishment with the creditor:
Perhaps the debtor is not interested in filing bankruptcy, but also cannot successfully traverse due to a valid judgment. In that case, the debtor might want to approach the creditor and offer a lump sum settlement or just agree to pay a different amount per month than would be garnished out of the paycheck.
Why would the creditor accept such a deal? Let’s say the judgment is for $10,000 and the creditor is slated to get $400 per month via a paycheck garnishment. If so, the it would take the creditor a long time to get $3,000 of funds from the debtor, so the creditor might want to accept $3,000 immediately and end the matter. The debtor likes this option because he gets rid of $7,000 worth of long-term debt (note that he will most likely though also have debt forgiveness income for tax purposes).
– File bankruptcy:
Filing Chapter 7 or Chapter 13 bankruptcy will certainly end the paycheck garnishment. Perhaps the debtor doesn’t even want to file bankruptcy, but the creditor will not voluntarily release the garnishment through a settlement. The debtor might feel no other choice but to file bankruptcy, because he can’t pay his other bills if he loses 25% of his take home pay.
As mentioned above, if the debtor has sufficient other debts that filing bankruptcy anyway is probably inevitable, this option makes more sense. This is because the other choices don’t solve a long-term problem anyway.
The other advantage of this option is funds involuntarily taken from the debtor in the 90 days preceding the filing of a bankruptcy case can be recouped as a preference if they exceed $600, so the debtor might actually get the garnished funds back when he files bankruptcy.
Finally, I would like to mention that my colleague, Jim Fletcher, has written an excellent book on garnishments in Georgia. This book covers everything you need to know about garnishments in Georgia and is considerably more detailed than this article.
Peter Bricks is a member of the National Association of Consumer Bankruptcy Attorneys (NACBA). He is a regular contributor to bankruptcyblog.org has bankruptcy attorney offices in Woodstock, Jonesboro, Cumming, Atlanta and Dunwoody.