I meet with many people who worry about having their wages garnished before filing bankruptcy. This is a reasonable concern-each paycheck can be garnished up to 25% to pay creditors. Bank accounts can also be garnished. But federal and state laws have been set up to protect consumers from overly-aggressive collection efforts and prevent creditors from immediately garnishing wages when you have only missed a payment on your credit cards. Medical bills and credit cards are unsecured debts.
Creditors can become a nuisance by constantly calling you if you have missed a payment, but the creditors cannot garnish your paycheck or bank account until after they have sued you, obtained a civil judgment against you, and also received a writ of garnishment against you. The collection process can take some time and we usually can file bankruptcy before our bankruptcy clients are garnished. Usually credit card companies wait a year before filing a lawsuit against debtors.
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The creditors usually charge off the unsecured debts after the debts are 120 days delinquent and sell the debt to a debt collection company who will make the collection calls. In the event that the debt collection company chooses to sue you, they must personally sue you with a lawsuit. Typically this occurs by hiring a process server to hand-deliver a copy of the lawsuit to you. Sometimes, though, the notice is mailed certified. When you receive a copy of the lawsuit, you are given 20 days to respond in writing to the allegations.
If you fail to respond to the lawsuit, the creditor will obtain a default judgment against you. With this judgment, the collection company then must get a writ of garnishment against you. Once the creditor gets a writ of garnishment, they must give you notice before garnishing your wages, taking your property, or garnishing your bank account.
Internal Revenue Service has Federal Exceptions The rules that apply to unsecured debt like medical bills and credit cards differ from the Internal Revenue Service. The IRS can garnish you wages, bank accounts, and levy property without first obtaining a judgment or writ of garnishment. Because the IRS rules differ, you would be well advised to speak with an attorney quickly if you owe the IRS money.
You should talk to a bankruptcy attorney if you have credit card obligations, particularly if the creditor is actively attempting to collect on your balance. Typically a bankruptcy consultation is free; and an experienced bankruptcy attorney can discuss other legal issues that may arise with your specific case.
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