How to Get Back Garnished Wages in a Bankruptcy
The bankruptcy code gives the bankruptcy trustee something it calls "avoiding powers." These powers include the ability to reverse or void transactions that appear to give one creditor preferential treatment over another. In bankruptcy proceedings, these types of transactions are known as "avoidable preferences." One way to recover garnished wages is to prove the garnishment was an avoidable preference. A transfer's classification as an avoidable preference hinges on whether it meets certain qualifications that may seem confusing or arbitrary. Getting your wages back requires proof that the wage garnishment meets all of those qualifications; accordingly, you should consider seeking assistance from a bankruptcy attorney.
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Instructions
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Show that the creditor who garnished your wages benefited from the transfer. Statements from the creditor, court judgments and your pay stubs may all serve as beneficial evidence that the garnishing creditor benefited from the transfer. You may be tempted to skip this step because it seems obvious to you that the garnishing creditor benefited from your wages. However, each step is explicitly required by the bankruptcy code. Accordingly, you should reconsider. It may help you to know that the bankruptcy code often uses the same rules to address both straightforward matters with individuals and complex transactions involving large companies with intertwined relationships.
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Be insolvent. The bankruptcy code generally defines an individual consumer debtor as insolvent if she has more debt than property. Fortunately for you, for avoidance purposes, the bankruptcy code presumes the debtor's insolvency on the bankruptcy filing date and the 90-day period preceding it.
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Prove the creditor garnished your wages after the debt arose. The trustee may only avoid transfers based on antecedent debts. An antecedent debt is an obligation incurred before the transfer. This should be straightforward since the typical garnishment comes about only after a creditor establishes you owe the money. While this may seem to go without saying to you, do not skip this step under the assumption that the same will be true for the judge. This step, as with all others, are the bankruptcy code's explicit requirements for establishing an avoidable preference.
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Count the days. Your creditor may have been taking money from your wages for years prior to your bankruptcy filing. Unfortunately, bankruptcy law only allows the trustee to recover funds taken within the 90-day period preceding the date you filed your bankruptcy petition.
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Crunch the numbers. You must prove the garnishing creditor fared better than it would have had it attempted to recover the amount you owed while you were in a Chapter 7 bankruptcy. This same standard applies regardless of the type of bankruptcy you actually filed. If, for example, your unsecured creditors would have received zero dollars in a Chapter 7, you can easily prove that the garnishing creditor made out better than your other creditors when it garnished your wages.
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Look for exceptions. Under certain circumstances, a trustee cannot recover your garnished wages. If, for example, the creditor took less than $600, the trustee cannot avoid the transfer.
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Review your state's bankruptcy exemption laws. While federal law governs bankruptcy, Congress left exemption powers to the states. Different exemption laws apply in and out of bankruptcy; accordingly, look to your state's bankruptcy-specific exemption laws. A bankruptcy exemption refers to the portion of the debtor's property that the trustee may not sell to pay your creditors. If the trustee recovers your wages and your state's bankruptcy exemption laws exempt some or all of them, the trustee may return the funds to you. Otherwise, she will use those funds to pay your unsecured creditors, and you will receive nothing.
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Tips & Warnings
Bankruptcy is a complex area of law. You should seek assistance from an experienced bankruptcy attorney in your state.
If you make mistakes while attempting to handle your own bankruptcy without a lawyer, your case may be dismissed.
References
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