Any Creditor Can Garnish Your Wages
In California, any one of your creditors can go after your paycheck. A credit card lender can do a credit card garnishment, medical providers can do the same for unpaid medical bills, your HOA can forcefully collect HOA dues against your will, and as the IRS can and will do an IRS wage garnishment to collect unpaid income taxes. Virtually any creditor can collect a debt by going after your paycheck. Under certain circumstances, the federal government can even do a garnishment of social security income.
How Filing Bankruptcy Will Help
Filing bankruptcy will stop a wage garnishment. The moment your lawyer files your case, all wage attachments stop. This is because, upon the filing of your case, an automatic bankruptcy stay goes into effect immediately by operation of law and stops all adverse collection action against you. Your wages are restored to what they were before the garnishment began. If your employer has been recently served with a wage garnishment order, it is important that you contact an experienced San Diego bankruptcy attorney immediately. Your case will take a few days to prepare and file, and possibly longer, and until your case is filed with the court the garnishment will continue and your money will continue to be deducted from your paycheck.
When Does Wage Garnishment Begin?
In San Diego, pursuant to California law, once your employer is served with an order from the sheriff, the wage garnishment will begin on the date specified in the order, usually about one week to ten days after the order is served on your employer. As long as you file bankruptcy before the order takes effect (about a week to ten days), your paycheck will not be taken. Also, account for the time it will take your attorney to notify the sheriff of your filing, and account for 2-3 days for the sheriff to instruct your employer to stop the wage garnishment.
How the Order is Served on Your Employer
To enforce the wage garnishment, the county sheriff serves an order on your employer. In San Diego, the sheriff places priority on serving wage garnishment orders upon employers. They serve such orders ahead of lawsuits and service requests.
How Much Is Taken From My Paycheck?
Once the order is served by the sheriff, your employer must then deduct from your paycheck and pay to the sheriff a percentage (usually 25%) of your pay, and must do so on each pay period. The sheriff, in turn, hands the money to your creditor in partial repayment of your debt.
How Long Will It Last?
Once any creditor files a lawsuit and obtains a judgment against you, whether by default or after a trial, your creditor can proceed to enforce the judgment through various judgment debt collection remedies, including a wage garnishment. Wage garnishments can continue for 20 years or until your debt to your creditor is paid off in full. The judgment upon which the liability is based lasts 10 years, and after 10 years the judgment creditor’s attorney can renew the judgment for an additional 10 years.
IRS Wage Garnishment
When the Internal Revenue Service (IRS) is garnishing your wages for unpaid tax debt, the IRS can take a percentage of your paycheck at any time after your taxes are due. The IRS does not need to go to Court and obtain an order. The IRS has its own sets of administrative rules and procedures that it follows.
How Your Attorney Can Recover Garnished Wages
If your wages have already been garnished, your attorney may be able to recover some or all of the recently garnished wages. In San Diego, if the money taken from your paycheck is still in the hands of the sheriff when you file bankruptcy, the San Diego sheriff will turn the funds over to the trustee for the benefit of your estate. The San Diego sheriff typically holds on to garnished wages for 2-3 weeks before handing the money to your creditor. As long as you file while your money is still being held by the sheriff and has not yet been distributed to your creditor, your lawyer can move to set aside the lien created by the garnishment as a preferential lien and have your money returned to you. This assumes that the funds are covered by your exemptions.
Avoiding Wage Garnishment Lien and Claiming Exemption
Unlike voluntary preferential liens, such as liens on cars, trucks, or other vehicles, which if avoided is preserved for the benefit of your creditors and your bankruptcy estate (and retained by the trustee), when you avoid an involuntary judicial lien, such as the lien created by a wage garnishment, the lien is preserved for your benefit. You can avoid the lien and claim an exemption in the funds that were garnished. While the trustee could do this for you, it is unlikely that he or she will do so. Your lawyer can file an adversary lawsuit to have the funds returned to you. However, the cost of filing such a lawsuit may exceed the amount that was taken through the garnishment, so it may not be economically feasible to attempt to recover the funds.
No Exemption Once Sheriff Gives Funds to Creditor
While your wages were in the hands of the sheriff, they are still yours, subject to your creditor’s lien, which you might be able to avoid as a preferential lien. Once the wages are given to your creditor, they are paid to your creditor in satisfaction of your creditors judicial lien and are no longer yours. Because the money is no longer yours, it is not your property for you to claim an exemption therein. Therefore, you will want to file immediately, while the sheriff is still holding your money.
If your wages have been garnished, or you are being threatened with a wage garnishment, you’ll need the assistance of a lawyer immediately. Contact Bankruptcy Legal Center today and talk to a lawyer to discuss your rights and options.