Bankruptcy. It is a real option when you simply cannot pay your bills. That can happen to all of us, just as life happens.
You may experience a job loss, a failed business, divorce, unexpected medical bills, or hours being cut. Any major impact to your income will interrupt your ability to pay your bills, and if your finances stay in trouble, bankruptcy may be your only option.
Filing a Chapter 7 bankruptcy will place an automatic stay on your debt, because your assets are technically in the hands of the bankruptcy court.
Chapter 7 Bankruptcy
This option will give you a clean slate if you can qualify. Chapter 7 allows unpaid credit cards, medical bills, and most other unsecured debts to be swept clean and a stay stops most creditors from collecting from your wages or your bank account.
Filing a Chapter 7 bankruptcy means creditors can no longer harass you with phone calls. Please note, however, that not all bills can be discharged.
If you are facing a lien on your property, that cannot be discharged. Neither can child or spousal support. If you are facing an auto accident claim involving drunk driving, for example, that too cannot be discharged.
In order to meet your remaining bills, you may be forced to sell off your property depending on the result of a “means test.”
If you have a valuable car, which you own, you may have to sell it and afford a less valuable vehicle. If you are still making payments, you don’t technically own it and you may be able to keep it minus any equity. You may have to sell your house if it does not qualify under the homestead exemption.
When your assets versus your debt is calculated, if your
assets exceed your debt, you may not qualify and may have to choose Chapter 13
debt consolidation instead.
Chapter 13 Bankruptcy
If you do not pass the means test, you may opt for Chapter 13 bankruptcy. This means you have some income and with a reasonable payment plan, you can pay off your creditors in three to five years. Chapter 13 also places an automatic stay that stops wage garnishments.
What is Wage Garnishment?
Wage garnishment may be another way to resolve your debt, but there is a process the creditor must undergo.
If you owe a credit card bill, or have a medical debt, or student loans, your creditors can’t just start grabbing your wages. They must first sue you in court and win a judgment which requires you to pay what you owe.
The only exception to that is the Internal Revenue Service, which can take a big chunk out of your wages without a court order.
After your creditors have sued you and proven their case in court, they can obtain an order to garnish your wages.
Wages may be garnished to pay back student loans, back taxes, child support, or any court judgment against you. Under federal law, there is a limit to how much creditors can take from each paycheck. It may be limited to 25% of disposable income, that is, whatever is left over after your employer has made the required deductions by law.
Under federal law, you cannot be fired or retaliated against if you have your wages garnished. At least to pay one debt. If there is more than one garnishment, federal law does not protect you from retaliation.
An Experienced Bankruptcy Law Firm
You may want to protest wage garnishment if you feel too much is being taken from your paycheck monthly. The Cochran Firm, Birmingham can help protect you during this difficult time. Consult with our experienced and compassionate attorneys to make sure you are claiming all the exemptions you have the right plan in place to get back on your feet financially.
Please call us at 1-800 The Firm or 205-994-8555 to reach our office so our lawyers can talk a look at your case and help protect your rights.