Recovering Funds Garnished or Levied Post-Bankruptcy
If, during the course of your bankruptcy, your bank account funds were levied, your paycheck was garnished, etc. you are probably hoping to recover the garnished or levied funds as soon as possible. Hopefully, your bankruptcy attorney advised you prior to handing your case that recovery of garnished or levied funds would require an uphill battle.
Recovering money levied from your bank account or garnished from your paycheck can be challenging even if you have the legal authority to demand their return. The challenging part is implementing your legal rights. The law and therefore, the process, will vary by state. In many states, you might not be able to recover any of the levied or garnished funds.
Money that is taken from you through bank levy of the garnishment of your paycheck within the 90 days prior to filing for bankruptcy becomes an asset of your bankruptcy estate. The estate consists of all your interests (legal or equitable) at that point in time. This includes your vehicle, your home, additional real estate if applicable, any high dollar personal items like jewelry, etc. In some states, there are provisions that allow you to exempt some or all of your property.
The trustee assigned to your bankruptcy case may demand the levied or garnished funds be returned to the estate. He would then disburse those assets to creditors and collect a fee. (This is the normal process by which the trustee manages assets and distributes payments to creditors with claims towards your estate). It’s possible for the funds to be designated as exempt from creditor claims (as noted above some states allow for the provision of protecting some or all of your property). If the funds were exempt from creditor claims, the trustee would be required to return the funds to you. The trick is that the trustee does not receive a fee in relation to obtaining these funds because they cannot be distributed to your creditors. So the trustee will have little to no interest in recovering the money. You will have to recover them yourself.
Keep your expectations low because the probability of recovering the funds is not high, but there are certain steps you can take if you’d like to attempt to have garnished or levied money returned to you after having it designated exempt in your bankruptcy.
- Check to see if the funds are still with the sheriff. The local sheriff’s department is typically assigned to execute on the levy or garnishment of any funds and they usually hold the funds for up to 30 days. If the funds are still with the sheriff, call the creditor and ask that they be released.
- If the creditor has already received the money, ask that it be returned. Most are aware when the request is backed by legal right. They don’t want to be sued for a failure to turn over money they are legally required to return.
- Contact your attorney or your trustee to aid you in obtaining the funds. If you filed on your own, you’ll be trying to navigate the legalities of the situation and the court system on your own and may find it necessary to obtain legal counsel as the next step is to file a motion with the court with requisite forms and according to local bankruptcy procedure.
It’s impossible to offer a simple answer to this problem. It’s possible to recover funds, but it’s not likely. Consulting an expert in Southern California bankruptcy law will increase your chances of navigating the situation successfully. Call Westgate Law today if you need help filing for bankruptcy or recovering funds levied or garnished.