If you or someone you know needs to stop garnishments today, read on to see how a Chapter 7 or Chapter 13 Bankruptcy can make it stop now.
Filing a Chapter 7 or Chapter 13 Bankruptcy STOPS garnishments immediately; however, a creditor is entitled to garnish you up until the day you file. That means even after a bankruptcy is filed, you may still see a partial garnishment on your following paycheck. That is why it is vitally important you speak to an attorney immediately if you believe you are about to be garnished and you know you can’t survive.
EXAMPLE: Your pay period is March 1st through March 15th. You file bankruptcy on March 8th, exactly halfway through your pay period. A creditor is entitled to garnish you up to March 8th. So, your next paycheck has a ½ garnishment, for the period March 1st – March 8th. The rest of your pay period (March 9th – 15th) was not garnished. Yet, you still have a partial garnishment on your paycheck.
You may be thinking – “I thought you told me filing bankruptcy would stop garnishments immediately.” That is true, so let me explain with an analogy. I like to use this visualization to help people understand Bankruptcy and Garnishment. Imagine you have a garden hose running full blast and you quickly turn it off. This is the filing of bankruptcy – turning off the water. Notice there is still water coming from the hose, even though you turned it off. This water draining out is your garnishment that attached to your wages before you filed bankruptcy. Even though you turned the water off, a portion still remains in the hose. This is why even though filing bankruptcy will stop an ongoing garnishment – depending on where you are in your pay cycle – you may still get a partial garnishment.
Post-petition Garnishment and Refund
When a bankruptcy is filed, a creditor will get a notice in the mail from the bankruptcy court, stating there is a bankruptcy on file and that they must comply with the automatic stay. Remember, the automatic stay is what prohibits a creditor from garnishing your wages. Most of the time a creditor will immediately stop the garnishment; however, sometimes a creditor may garnish your post-petition wages.
In the prior example above, imagine the creditor garnished the rest of your pay period (March 9th – 15th). This is called a post-petition wage garnishment. The creditor would be required to refund this money to you. The wage garnishment for the pre-petition period (March 1st – 8th) they may be able to keep.
How Much Can a Creditor Garnish?
If you’ve received a notice of garnishment, you may be curious how much of your paycheck can be taken by creditors. KSA 60-2310(b) states in part: (1) Twenty-five percent of the individual’s aggregate disposable earnings for that workweek or multiple thereof; (2) the amount by which the individual’s aggregate disposable earnings for that workweek or multiple thereof exceed an amount equal to 30 times the federal minimum hourly wage, or equivalent multiple thereof for such longer period;
What this means is that 25% of your “disposable earnings” are subject to turnover of your paycheck, as long as you work 30 or more hours per week at minimum wage or above. For clarification on “disposable earnings”, we turn to KSA 60-2310(a)(2) which states in part: “disposable earnings” means that part of the earnings of any individual remaining after the deduction from such earnings of any amounts required by law to be withheld.
EXAMPLE: You work 40 hours per week and earn $10/hr. Your gross paycheck is $800 every two weeks. You are required to pay Federal and State taxes, which are 15% of your gross wages ($120), so your net paycheck, after required deductions are $680. Your creditors are entitled to garnish 25% of $680, which means they can take $170 of your paycheck, leaving you with just $510.
As you can imagine, a 25% pay cut is a huge portion of your paycheck, and can result in people getting behind on their utilities, rent, mortgage payment, car payment, student loans, etc. They often lead to short term solutions like payday loans, title loans, or cashing out retirement or savings. Even a short term garnishment can crush someone who is living paycheck to paycheck. But there is help.
To Learn More About Filing Chapter 7 or 13 Bankruptcy and How it Can Stop Garnishments, please give us a call at email us now. Chris W. Steffens is a Kansas Licensed Bankruptcy Lawyer.for a FREE Consultation over the phone or in person or you can