Bankruptcy Basics: Creditor Access to Consumer Wages & Funds
When a consumer owes a debt, the creditor has the right to collect on the debt. When the consumer cannot pay the debt, there are a number of different scenarios that could occur. For instance, if it is secured debt, such as a vehicle loan, the consumer can return the car stating that they cannot afford to pay. In this instance, the creditor can then sue the consumer for the balance of the loan.
Some creditors will be willing to negotiate payment terms. Let them know what you can afford to pay each month and they will respond with an agreement or they may simply decline your offer and seek a judgment through the court.
If the creditor seeks judgment through the court for non-payment of a debt, the court is likely to give it to them so long as the debt is valid. Continued nonpayment will result in a growing balance. This is a difficult situation, particularly as most consumers who find themselves in this situation are there because they could only afford a certain amount each month and that amount is still not enough to satisfy the terms of the judgment.
If you present your best offer to the creditor and it is declined (because, let’s be honest, the creditor really does not care what you can and cannot afford), the only thing that matters is what the creditor can now do to enforce the judgment against you. The obvious response in this situation would be wage garnishment.
If you have recently had a creditor take a judgment out against you for nonpayment of debt and you have been unable to pay, the creditor is probably searching for your employer right now. They will access your credit report where the name of your current employer is most likely listed. If not there, they will access one of the many social media sites where employers are listed (LinkedIn, Facebook, etc.) Creditors have entire departments dedicated to seeking information on consumers who aren’t paying their debt. Once they find the information they need (which isn’t a lot), they will obtain and serve a wage garnishment order to your place of employment.
The creditor is allowed to garnish up to 25% of your take home pay by the court. (Note: this amount may vary depending upon your state of residence). You, as the consumer and wage earner, will have the right to object to the amount once you have been informed of the wage garnishment order either by mailed notice or by your employer after they are notified.
Once the wage garnishment order has been received, your wages will be garnished even if you object until you have your hearing. It doesn’t matter if the garnishment means that you can’t make your rent each month or if your prescriptions will now be inaccessible because you don’t have the cash to pick them up or if your kid’s school tuition goes unpaid. The deduction percentage listed in the wage garnishment order will continue to occur until a court order is obtained that lowers the amount.
The same department at the creditor’s company that seeks out information on how to find your employer is also in charge of obtaining the information necessary to levy your bank accounts. If they are able to determine where you bank, they can levy the balance of your account to $0.00 regardless of outstanding checks or upcoming due dates for rent, electricity, etc. Once a creditor has a judgment against you, you can’t keep money in a bank account safely because the balance will be at risk until the judgment is paid. Levying an account is easier than you might think. The creditor simply needs to find the name of the bank you use (not the branch). The bank is then served with a court ordered levy through the sheriff’s department and your account is frozen. You are not given notice because they don’t want you to clear out your funds.
If you have additional questions about wage garnishment, or levied bank accounts or how bankruptcy could stop wage garnishment, please get in touch with one of the experienced southern California bankruptcy attorneys at Westgate Law as soon as possible. We could help you determine whether or not you may be eligible to get your money back by filing bankruptcy.