G is for Garnishment

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G is for Garnishment

The bankruptcy hand is all-powerful in the face of garnishment.

Wage Garnishment can feel like a losing battle, but with Bankruptcy, you can get the extra help you need.

Currently, North Carolina makes it impossible for most creditors to touch the last two months of wages a person has earned. This is a small, but crucial buffer from the blow of almost complete insolvency and gives them a little money to start over. Recent North Carolina legislation has been proposed to change that, but so far, there is, generally, no wage garnishment in North Carolina. Despite its rarity, there are still a number of people in the Western District, and all over North Carolina, who have their wages garnished for the following reasons:

  1. Unpaid tax debt or other debt to the state of federal government.  The IRS can garnish wages without first obtaining a judgment, as can the North Carolina Department of Revenue (NCDOR). Typically, garnishment happens after a number of communications in attempt to make payment arrangements, but sometimes, people just cannot afford to repay the taxes by the available options.  In these instances, filing a Chapter 7 bankruptcy may permit discharge of some taxes (or other debts, freeing up income to repay the taxes) or filing a Chapter 13 bankruptcy may create a viable repayment plan.
  2. Court Ordered Child Support.  Since 1988, all court orders for child support include an automatic income withholding order.  The other parent can get a wage garnishment order from the court, as well (if you are behind on payments).  Federal law limits what can be taken, but the limits are high (up to 50% of disposable earnings if you currently have a spouse or child you are supporting who is not the subject of the order, 60% if you aren’t supporting a spouse or child).  An additional 5% may be garnished for support payments over 12 weeks in arrears.  North Carolina G.S. §110-136 limits the garnishment to 40% of disposable income. While child support is never dischargeable in bankruptcy, a Chapter 13 bankruptcy may permit more affordable repayments of past due child support payments.
  3. Federal student loan debt.  If student loans are in default, your wages may be garnished.  Generally, student loans are not dischargeable in a bankruptcy, with few exceptions. However, a Chapter 13 will stop a garnishment for up to five years and help rearrange debt to make student loans easier to repay.  Additionally, the attorneys at Collum & Perry, PLLC, are uniquely interested in Student Loan law and have a practice established to help people get out of default and into affordable repayment plans.
  4. Garnishment orders from other states.  Virginia creditors often sue in Virginia Courts, get garnishment orders, and begin garnishing before anyone knows that there was an issue.  Filing a Chapter 7 or Chapter 13 Bankruptcy is the easiest way to shut these down, but you may also want to speak to one of our attorneys about counter measures you can take in this type of action.