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Can a garnishment be taken out after bankruptcy has been filed?

Denver, CO |

I filed bankruptcy on April 18th and my weekly paycheck showed a garnishment still for April 25th check

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Attorney answers 4

Posted

The garnishment, if from a pre-petition debt, must stop (google: automatic stay). If the garnishment was going on before the case was filed, then it's probably a pre-petition debt. In addition, if the creditor has garnished more than $600 from you in the 90 days before filing, you can get the money back. You should see an attorney to help make this determination.

Stephen Clark Harkess

Stephen Clark Harkess

Posted

You cannot actually get back money garnished before you file even if it is in excess of $600. In that case, the creditor will not be able to keep it, but it won't go back to you. Instead, it will be turned over to the Trustee.

Joseph Ryan

Joseph Ryan

Posted

I exempt the preference payment on schedule B and send a demand letter to the creditor to return the funds garnished in the last 90 days if the aggregate is over $600. The creditor then returns the funds to my client - without ever having gone through the trustee.

Joseph Ryan

Joseph Ryan

Posted

List on schedule B and exempt on C.

Stephen Clark Harkess

Stephen Clark Harkess

Posted

Colorado doesn't have a wildcard exemption, so the garnishment cannot be exempted if you have lived in Colorado for 2 years prior to filing. Since it cannot be exempteed, the money goes to the Trustee. Maybe some day the Colorado legislature will allow the use of federal exemptions and/or create a wildcard exemption.

Joseph Ryan

Joseph Ryan

Posted

You're right, no wildcard exemption will direct those funds to the trustee. In the future, I keep forgetting when answering questions that not all states allow for use of the federal exemptions.

Joseph Ryan

Joseph Ryan

Posted

*stop forgetting

Posted

The garnishment will stop with a bankruptcy filing. Sometimes there might be issues with a post-filing garnishment if the payroll information was sent prior to the bankruptcy being filed or the employer notified. You should be able to recoup any post-filing garnished wages. Also, you should have listed any pre-filing garnished wages as an asset on Schedule B, using your wildcard exemption to protect. This will allow you to recover any pre-petition garnished wages.

Stephen Clark Harkess

Stephen Clark Harkess

Posted

Colorado does not have a wildcard exemption, so that part of the advice will not apply if you have lived in Colorado for 2 years prior to filing.

Posted

Garnishments don't stop by magic. You have to communicate with all the affected parties, and if a paycheck has already been processed with the garnishment at the time you filed bankruptcy, or if the employer and the creditor were not aware of the bankruptcy filing, this mistake is understandable. Hope this perspective helps!

Posted

If you filed on the 18th then the garnishment should have stopped, but the creditor may not have received the notice before the April 25 payment came out of your check. You can have your bankruptcy attorney contact the creditor and they will refund the last garnishment.

You can reach Harkess & Salter LLC at (303) 531-5380 or info@Harkess-Salter.com. Stephen Harkess is an attorney licensed in the state and federal courts of Colorado. This answer is for general information only and does not create an attorney client relationship between Stephen Harkess or Harkess & Salter LLC and any person. You should schedule a consultation with an attorney to discuss the specifics of your legal issues.

Robin Kert Hunt

Robin Kert Hunt

Posted

I generally agree with the preceding answer by Mr. Harkess, especially his pointing out elsewhere in these answers that there is no wild-card exemption if Colorado exemptions apply. If the April 25 check is payment for earnings between 4/19 and 4/25, then (a) the check was earned after the bankruptcy filing, (b) a creditor is prevented from collecting post petition by the bankruptcy stay, and (c) a debtor can get the garnished pay back from the creditor and keep it. If the April 25 check is payment for earnings between 4/12 and 4/18, then (a) the check was earned before filing the bankruptcy petition, and (b) any amount garnished is property of the bankruptcy estate. A debtor (or bankruptcy trustee) can get the garnished funds back from the creditor, but the trustee may choose to include that money in property of the estate used to pay all creditors. If the trustee is not interested in using it to pay creditors and "abandons" it, the debtor may keep it. If the timing is different, any part of a check earned prepetition may be property of the bankruptcy estate while the post petition earnings belong to the debtor.

Stephen Clark Harkess

Stephen Clark Harkess

Posted

Mr. Hunt is correct. As you can see, the issue (like many in bankruptcy) is not completely simple and it is very useful to have an experienced bankruptcy attorney represent you when you file bankruptcy so you can protect as much of your property as possible.

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