California recently passed a law that will help people facing wage garnishment. The law increases the amount of a person's wages that can be exempt from garnishment from $217.50 per week to $320 per week. Although the extra $100 is certainly welcome, people facing garnishment can still struggle financially. For many of them, bankruptcy may be a solution to their problem.
Wage garnishment and California law
Wage garnishment is one of the legal remedies that creditors have under California law. It is an enforcement action where the creditor receives a certain portion of each paycheck of the debtor. Under California law, in addition to wages, other assets such as bank accounts can also be seized to satisfy a debt.
Generally, creditors cannot garnish a person's wages until they have sued them in court and obtained a judgment. However, there are exceptions to this rule. For example, the IRS does not need to go to court before garnishing to recover tax liabilities.
Under California law, creditors are not allowed to take the entire amount of a debtor's paycheck. Under the new law, the maximum amount of a weekly wage that creditors may garnish is limited to the lower of:
· Twenty-five percent of the debtor's disposable earnings (what is left over after mandatory deductions) for the week; or
· The amount by which the debtor's disposable weekly earnings exceeds 40 times the minimum wage.
In addition to the limits on the amount that may be garnished from each paycheck, California law also exempts certain types of income from garnishment. For example, the amount that is necessary to support the debtor or his or her immediate family is exempt from garnishment. Additionally, Social Security and other retirement benefits cannot be garnished.
How bankruptcy can help
For many struggling with debt and are facing garnishment, bankruptcy can provide a solution. In general, individuals have a choice of filing Chapter 7 or Chapter 13 bankruptcy. Once either type of bankruptcy is filed, the automatic stay immediately stops all creditor enforcement actions such as garnishment.
The type of bankruptcy that would be right for you depends on your situation. Chapter 7 bankruptcy is ideal for those who cannot pay off their debts, are unemployed or have few assets. Under this type of bankruptcy, the debtor's nonexempt assets (multiple cars, vacation homes) are sold off to pay for his or her debts-an outcome an experienced bankruptcy attorney can generally avoid.
Chapter 13, on the other hand, is for debtors with a regular income. Under this type of bankruptcy, the debtor is allowed to keep all of his property, as his or her debt is consolidated into a payment plan that requires only a tiny percentage be repaid over a three to five-year period.
Regardless of the type of bankruptcy filed, the debtor receives a discharge once it is completed. The discharge eliminates the debtor's legal obligation to pay off many types of debt, such as credit cards or medical debt. In many cases, this will stop any future threat of garnishment, as such debt is the very reason why the debtor was being garnished.
Consult a bankruptcy attorney
Bankruptcy is a complicated area of the law with many traps for the unwary. If you are facing garnishment, contact an experienced bankruptcy attorney. An attorney can help you determine whether bankruptcy is right for you.