This post describes the behind the scenes process for stopping a wage garnishment after a person files bankruptcy.
Most importantly, it tells you what to expect with your paycheck after you file bankruptcy.
Note: the following information applies to wage garnishments to pay old debt judgments. It may not apply to garnishments to pay taxes, child support, or student loans. Contact us if you have one of these special situations.
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Your First Paycheck After Filing Bankruptcy
The bankruptcy automatic stay goes into effect the moment your bankruptcy is filed (in most cases.)
But, it is possible one or two more more paychecks will be garnished after your bankruptcy filing date.
This is because there are several steps and parties involved in stopping a wage garnishment after a person files bankruptcy.
The good news is you will get back any amounts garnished post-bankruptcy.
It is likely your HR / payroll department processes payroll a week to ten days or before you are actually paid.
HR / payroll often will not have time to receive a garnishment release in time to update the payroll figures for the first pay period after a bankruptcy filing.
Parties Involved in Releasing a Garnishment
Three different entities are involved in processing a garnishment release– four if you count the bankruptcy court.
Each entity has to process the garnishment release before it hits your paycheck.
Our office sends bankruptcy notices directly to the garnishing creditor, the state court where the corresponding judgment is entered, the Sheriff’s office handling your garnishment, and your payroll office. We do this in hopes it speeds up the garnishment release process.
But, the Sheriff and your HR Department are unlikely to process a garnishment release until the following steps are followed.
Steps to Stopping a Wage Garnishment
The garnishing creditor receives a bankruptcy notice from the bankruptcy court or from our office. The creditor typically (but not always) processes a garnishment release fairly promptly.
Our office calls the garnishing creditor to alert them to the bankruptcy filing. This can speed things up.
The creditor sends the garnishment release to the Sheriff.
The Sheriff’s office processes the garnishment release, then sends a garnishment release to your HR / payroll department.
Payroll / HR receives the garnishment release, then has to update their payroll system.
You Get Back Post-Bankruptcy Garnishments
The amounts garnished (post-bankruptcy) should be added back into future paychecks in the next pay cycle or two.
You get back all amounts garnished after your bankruptcy filing date.
Getting Back Pre-Bankruptcy Garnishments
In many cases you will also get back 90 days’ worth of pre-bankruptcy garnishments.
This applies if the 90-day amounts exceed $600.00 and you were able to protect the amounts using your bankruptcy exemptions.
It takes longer to get these amounts back because refunds can’t happen until your bankruptcy trustee files a report saying they do not claim any right to the funds.
Trustees usually file these reports very soon after your Meeting of Creditors.
If you are struggling with a wage garnishment, the Law Offices of Karen Ware can help. You might be able to get back amounts that exceed the cost of filing bankruptcy. Give us a call for a free consultation at (805) 284-0760.