The garnishment of wages by creditors has become very common these days. Truth is, this remedy has been available to neglected creditors for several years now, but it has become a popular trend only in the recent few years. The reason is probably because it is not difficult for a creditor to institute a garnishment action and be successful. If you have stopped paying your creditors, whether it be the local hospital or American Express, and have a judgment entered against you, a percentage of your hard earned wages are at risk of being garnished. This can also effect any legal The process to garnish wages is not an overnight process, so you do not need to be alarmed.
The first step requires the creditor to notify the Marshall Office of their intention to garnish wages from a particular individual. The creditor will begin by filling out an application, paying a filing fee, and providing proof that a certain debt is due and owing. The Marshall will then send out notice of the proceeding to your place of residence. The notice will include the name of the creditor, the amount due, and provide that unless arrangements are made to pay off the debt in issue within twenty days, your employer will be sent a notice of the garnishment. If no payment plan is reached with the Marshal Office within the allotted time, the judgment creditor will be able to garnish 10% of your gross wages. In addition, non-exempt funds over $2100 in bank accounts and similar institutions can also be levied upon. Before the situation reaches this stage, you can always try to negotiate and reach a settlement with the creditor. Most creditors are willing to negotiate because they know that if you decide to file for bankruptcy, chances are that they will receive absolutely nothing in the equation. Filing for bankruptcy is another method to stop any garnishment enforcement. As soon as you file for bankruptcy, whether it is a chapter 7 or chapter 13 (payment plan), the “automatic stay” imposed by the court prevents garnishments, bank levies, and any other enforcement procedures. If you have no substantial assets, then you may be able to qualify for a Chapter 7. This type of bankruptcy will allow you to discharge all your debts, including any judgments. You will not have to negotiate and pay any unsecured creditors. If you have limited assets and have not engaged in fraud, then no payment will be due to the judgment creditor.
Most importantly, when you are officially declared bankrupt by the court, there are no tax consequences associated with the discharge of your debts. You will not have to declare the thousands of dollars that were forgiven in your bankruptcy as “income” on your tax return. However, for debts settled outside of bankruptcy, the portion of the debt that was written off (discharged) will be considered income, in which federal and state tax may be due. Contact an experienced debt and bankruptcy lawyer, who will be able to consult you on the best viable option for you.