In the state of New Jersey creditors can garnish up to 25% of your wages if they are successful in winning a lawsuit against you. That first much smaller paycheck often serves as a wake-up call to people who had been contemplating bankruptcy but who had, for one reason or another, hesitated before moving forward.
Once they do, this is often one of the first questions they ask. Someone who is dealing with this level of financial distress often needs every penny he or she can get.
And the answer is: it depends.
See also: Don’t Let These 5 Bankruptcy Myths Lead You Astray.
First, it depends on how much time has passed.
If you’re moving forward right after that first check you might have some room to get it back. The money is likely to be sitting in a court account and may not have been disbursed to your creditors yet.
If you let six months of garnishments pass before you decide to file for bankruptcy then chances are that money is gone for good, just as if you’d tried to continue paying down your credit card debt before dismissing the entire exercise as being completely useless.
See also: 7 Things New Jersey Residents Should Never Do When a Collection Agency Calls.
It depends on the form of bankruptcy you’ve filed.
This is one reason why it’s so important to get professional guidance from a licensed bankruptcy attorney before attempting to file. The chapter you file dictates so much about what you can and can’t keep, or what happens to property.
Here’s how your chapter impacts garnished wages.
See also: What is an Emergency Bankruptcy Filing?
Chapter 7
If your bankruptcy lawyer moves quickly enough you may be able to claim that money as an exempt asset, at which point you could recover it. Sometimes this is all it takes.
Sometimes, we must first show the money represents a preferential payment that wasn’t your fault. At that point the court can take the money from the creditors before proceeding with the case, and we can then argue that it’s an exempt asset that should be returned to your bank account.
Neither option is fast, but sometimes they work.
Chapter 13
You’re less likely to get the money back directly if you’re filing a Chapter 13 bankruptcy. This is because the trustee will want to roll it into your payment plan. On one hand this is a good thing, because it helps you stay current with those payments. On the other, it takes money directly out of your pocket.
If you do try to get it back, you’ll have to negotiate with the trustee. You’ll have to demonstrate why you need it, what you’re going to use it for, and why having it seized presents a substantial hardship. Sometimes it’s just easier to let it go and allow the money freed up by your reduced debt payments to pay for whatever necessity you were doing without.
See also: Can I Convert My Bankruptcy to a Different Chapter?Need help?
The issue of garnished wages is a great example of one of the complications which can arise so swiftly in a bankruptcy case. And if you’ve had your wages garnished, it’s an immediate sign that you’re a good candidate for bankruptcy.
Call us today for your free consultation, and let us know about your wage garnishment issues. We are happy to help.