If you’re a New Yorker and your wages are being garnished, filing for bankruptcy may be a way to stop this from happening and to keep all of your wages.
A wage garnishment immediately ceases upon the filing of a bankruptcy due to the automatic stay; the automatic stay is an injunction that is typically imposed against certain creditors who hope to begin action against a debtor. This is one of the perks of filing bankruptcy since either a Chapter 7 or Chapter 13 filing will stop a wage garnishment. This will then give you time to repay the debt. Maybe the debt will be discharged in the bankruptcy. Regardless, the garnishment will stop because of the filing.
What money is eligible for wage garnishment?
In New York, some income can’t be garnished, including the following:
- 90 percent of your income earned in the last 60 days
- Court-ordered child support
- Income from unemployment insurance, disability, and worker’s comp benefits
- Public assistance
- Public/private pensions and retirement savings
- Social security
How does wage garnishment work?
If you’re employed and your income is at a certain level, then a judgment creditor can garnish your wages to collect what you owe them. The creditor files an “income execution form” and has it signed by the proper authority, such as the county clerk. Depending on your specific situation, you may be able to challenge this.
If it goes through, the court issues an order for your employer to withhold a part of your paycheck to send to your judgment creditor. Of course, this doesn’t decrease your gross wages, but it does lower the amount of money that enters your bank account on pay day.
While it may be a relief to stop the wage garnishment, it’s critical to understand how the bankruptcy impacts the debt.
Types of Wage Garnishment
Depending on the type of wage garnishment involved, this will determine how the debt is treated in a bankruptcy.
- Federal student loans/income tax: Typically, federal income tax and federal student loans can take 15 percent from disposable income, which means all the money that you make that doesn’t go to the deductions that the law requires. However, the calculation doesn’t include rent or mortgage, or utilities; it does include Social Security and Medicare taxes. The debts will probably not be discharged in the bankruptcy; the garnishments may continue after the bankruptcy is over, and the automatic stay is lifted.
- Child support/alimony: This can take up to 50 percent or more of your wages. If you need a modification, you typically will file it with the appropriate family court instead of the bankruptcy court. The chances for the debts to be discharged aren’t very likely due to the type of debt involved.
- Banks/credit card companies: These consumer-based types are typically adjusted or discharged in a bankruptcy, so when you file either a Chapter 7 or Chapter 13, it could be a long term stop to the garnishment.
Talk to a NY Bankruptcy Attorney About Wage Garnishment
Filing for bankruptcy can get you back on track financially, and it may be a way to help you if you’re dealing with the garnishment of your wages. Each case is different, so it’s important to speak with an experienced bankruptcy attorney who can advise you on your specific circumstances. You can start by talking to a knowledgeable MOWK Law attorney. Contact us today to help ease your mind about your financial uncertainty.