Garnishments and Bankruptcy

Wage Garnishments in Indiana

What is a garnishment?

Wage garnishments occur when your creditors or the government take legal action in order get satisfaction of an unpaid debt.  Most creditor garnishments require a court order directed to your employer.  However, the federal government may attach your wages directly in the case of student loan garnishments, tax garnishments and for social security overpayments.  If you work for the State of Indiana, the state government can garnish your pay for past due real and personal property taxes.  These are typically limited to a lower garnished amount than the traditional garnished amount  of up to 25% of net, or "take home," pay (more for child support obligations).  Take home pay is your gross pay minus taxes (it does not deduct 401(k) deductions or insurance in the calculations).

Oftentimes, the wage garnishment is the breaking point for people who have severe debt. While harrassing phone calls from creditors may be ignored, or collection letters filed in your circular file cabinet, it is difficult to hide the court order from your employer who has been instructed to start garnishing your wages.   This means that you can no longer delay fixing  your debt problems.

In addition, a creditor can also garnish any funds in your bank account if they can pinpoint where you currently are banking. In Indiana, creditors can garnish up to 25 percent of every paycheck and take as much from your bank account (that is not exempt) as they deem necessary unless you act quickly to stop the garnishment from the beginning.

How does bankruptcy stop garnishments?

If you are at risk of being garnished, consider filing bankruptcy.  The federal bankruptcy laws will stop debt collection including garnishments.  When you file bankruptcy (whether it is a Chapter 7 bankruptcy or a Chapter 13 debt reorganization), an automatic stay goes into effect that stops most collection activities.  Creditors won’t tell you about this federal bankruptcy protection (the "automatic stay") which immediately stops further garnishment for as long as the automatic stay is in effect(even if the creditor has no knowledge of the bankruptcy filing).  This stay will continue throughout your bankruptcy case unless terminated or modified by the bankruptcy court.  For most garnishments, the debt will be discharged (for more on Dischargeable vs NonDischargeable),  at the end of the bankruptcy case and the creditor  can never initiate any collection effort, including wage garnishment, ever again.

What is the process?

As soon as a bankruptcy case is filed,  we immediately send a notice to your employer, the creditor (or their attorney) and the court that the bankruptcy automatic stay has been issued that immediately prohibits further garnishment.  Garnishment is ceased upon filing.  If you need the garnishment to stop right away, our office is prepared to assist you in filing an immediate emergency bankruptcy filing.  

How do I get started?   

If you are facing a garnishment, don’t do it alone. Our attorneys have extensive experience with a variety of situations surrounding wage garnishment.  We will discuss your specific situation, walk you through the bankruptcy process and make the garnishment stop.   We welcome the opportunity to meet with you to talk to you about your situation at no charge. More than anything, we look forward to helping our clients get a fresh start so that they can start living their lives again.

Steven P. Taylor, P.C. | Kokomo and Indianapolis Chapter 7 Bankruptcy Lawyer

Contact the law firm of Steven P. Taylor, P.C. today in his Indianapolis Bankruptcy office at (317) 271-1111 or his Kokomo Bankruptcy office at  (765) 868-0807 for a free consultation about whether you should file for Chapter 7 or 13 bankruptcy to protect your wages in Indiana or email us your questions.   Steven P. Taylor will assist you in determining whether a bankruptcy is the best path for you, and will guide you through the bankruptcy process

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