Garnishing wages is a remedy creditors can use to recover money they are owed from a Debtor. In order to garnish wages, a suit must be filed. Once a suit is filed, the creditor must obtain a judgment against the debtor via the proper court procedures. Once a judgment is obtained, the creditor can go through the procedure to request a garnishment order from the Court. Once the garnishment order is issued, the order is forwarded to the employer and the debtor’s wages are garnished. Each states rules and procedures for this process can be different.
Filing bankruptcy will stop this process. Once a person files bankruptcy, an automatic stay goes into effect. The automatic stay stops creditors from calling, contacting, suing or continuing to sue a debtor. If a creditor continues to call, contact or proceed with a lawsuit against a debtor who filed bankruptcy, the creditor is in violation of the bankruptcy court’s automatic stay. In that event, the creditor could be held liable for sanctions for violating the automatic stay order.
If a debtor files bankruptcy before a creditor obtains a garnishment order from a court, then due to the automatic stay, the debtor’s wages cannot begin to be garnished. If the debtor files bankruptcy after a garnishment order is issued and wages as garnished, the garnishment must stop as of the date of filing bankruptcy because of the automatic stay. Any wages garnished prior to filing bankruptcy may stay with the creditor, but any wages garnished after filing bankruptcy must be returned.
You should contact a knowledgeable bankruptcy attorney to discuss your options and to stop wages from being garnished. My office has stopped many garnishments through bankruptcy, and funds garnished after filing have been returned to the Debtors.
Some tax obligations can be discharged in bankruptcy, and some cannot. Section 507 and 523 of the Bankruptcy Code addresses discharging taxes in bankruptcy. Typically, personal income tax obligations can be discharged in bankruptcy provided certain conditions are satisfied.
To discharge income taxes in bankruptcy, first, the income tax obligation has to be at least three years old at the time of filing your bankruptcy. The three year calculation starts from the date the taxes were due (including extensions). For example, 2011 taxes were due April 17, 2012. 2011 income taxes will be three years old on April 17, 2014 (if not filed under an extension). Second, the tax returns for which the tax was due must have been filed at least two years before filing bankruptcy. For example, if a bankruptcy was filed on April 16, 2012 the 2008 taxes would be three years old, but only if the 2008 returns were filed prior to April 15, 2010.
As always, there are certain exceptions to every rule. The time periods may be extended if you have filed bankruptcy before, or filed a false or fraudulent return. You should contact a knowledgeable bankruptcy attorney to determine whether you can discharge your income tax obligation in bankruptcy.
Typically, husbands and wives incur joint credit card bills, medical bills and other bills. A joint bill means that both the husband and wife are liable for the entire bill. The bill collector can pursue either spouse for the entire balance of the bill. A spouse who is only an “authorized user” on a credit card is liable for the amount of charges made by that person on that account. In that instance, the bill collector can pursue the “additional user” for his or her charges.
Bankruptcy law allows married couples the option to file a joint bankruptcy. Also, one spouse can file for bankruptcy while the other does not. If a husband and wife file a joint bankruptcy, then both spouses will receive a discharge from both their individual debts and joint debts. If only one spouse files bankruptcy, then only the filing spouse will receive a discharge of individual and joint debts.
When only one spouse files bankruptcy, the non filing spouse will remain liable for his or her individual debts. Additionally, the non filing spouse will remain responsible for any joint debts. What this means is that the bill collector will still be able to pursue the non filing spouse for the balance on the joint bill. Also, a non filing “additional user” on a credit card bill will still be responsible for the charges he or she made on that account. Your spouse filing bankruptcy will not discharge your debts or your obligation under any joint debts. You can only discharge your debt obligations by filing your own bankruptcy or a joint bankruptcy with your spouse.
Even if only one spouse files bankruptcy, the non filing spouse’s income and expense information is required to prepare the bankruptcy petition. (Unless the couple is separated.) Therefore, if only one spouse files bankruptcy, the filer will still need cooperation from the non filing spouse in regards to preparing the bankruptcy documents. As always, you should contact your local bankruptcy attorney for input on filing bankruptcy when you are married.