One day you go to work and find that your paycheck is being garnished for a debt that you owe. This is something that we see on a regular basis. In addition to all of life’s problems you now are worried about how you are going to pay your mortgage, electric bill, or even buy food. When people are experiencing the described problems associated with having a wage garnishment, normally the first question they ask is, “can you help make it stop?” The staff at Marks Law Firm has the experience necessary to help you in stopping wage garnishments.
The Creditor Must File a Law Suit
In order for a garnishment to take place, a creditor must have filed a law suit against a debtor and obtained a judgment. Garnishments typically take on two forms. Once a judgment is entered, the creditor has the option of either garnishing wages or placing a levy on a bank account (i.e. freezing a bank account). The creditor must choose and cannot exercise both options at the same time. There are ways to stop a wage garnishment or bank levy. Options for stopping a garnishment include filing for bankruptcy but can include other methods. If creditors are threatening a wage garnishment or to freeze a bank account without first obtaining a judgment against you, the creditor has violated consumer protection laws including but not limited to the Fair Debt Protection Act and the Iowa Debt Collection Protection Act. If a creditor has threatened to garnish wages or freeze your bank account without first obtaining a judgment, call Ashley Zubal to discuss your rights and what steps you should take.
Garnished Wages / Bank Account Levy
Most of our clients experience garnishment of wages. Iowa Code § 642.21 limits the amount of wages that can be garnished depending on an average of a person’s annual income. Typically twenty-five percent of net earnings can be garnished per pay period until the wage garnishment limit is reached. Client’s sometimes also experience garnishment in the form of a bank account levy. If a bank account is levied or frozen, the bank is required to hold the funds for a period of time, which includes any ongoing direct deposits. After the period of time expires, the funds are turned over to the sheriff to be transferred to the clerk of court. After the clerk of court has received the funds, the creditor must file to a Motion to Condemn Funds with the clerk of court in order to receive the money. If the amount turned over to the creditor exceeds the amount of the judgment, the debtor will receive any excess levied funds. During the levy period, a debtor may not access the bank account to withdraw funds. It is advised that the debtor stop any automatic withdrawals during the levy period and stop direct deposit on pay stubs (it can take up to three weeks to stop a direct deposit). Continued automatic withdrawals in addition to the levied funds can cause significant overdraft fees and bank charges. Section § 627.6(14) of the Iowa Code provides an exemption of “the debtor’s interest, not to exceed one thousand dollars in the aggregate, in any cash on hand, bank deposits….” There are ways to stop a bank levy prior to its expiration. Contact Marks Law Firm to see how we may help you stop the levy before it expires and to assist in retrieving some of the money that may have been taken from your bank account.
Stopping a wage garnishment can many times be a long and rocky road. Filing a chapter 7 bankruptcy or chapter 13 bankruptcy stops all garnishments and levies. This is because Bankruptcy Code 11 U.S.C. 362(a) provides that once a bankruptcy is filed an automatic stay goes into place restricting all creditors from any collection activity.
If only it were that easy.
Typically, even upon filing the bankruptcy, it will take anywhere from approximately one week to a month or more to stop a garnishment. Unfortunately this is due to several parties having to work together. These parties include, but are not limited to the following: Marks Law Firm; the clerk of court where the judgment was entered; the sheriff’s office in the county where the garnishment was served; the payroll department or bank; the bankruptcy trustee; and the creditor’s attorney. Immediately after Marks Law Firm files your bankruptcy we send a Notice of Bankruptcy to all parties including the sheriff’s office. The sheriff is supposed to immediately notify the employer or the bank where the money is being taken and let them know they are to stop taking the money and release any held wages or money right away. The payroll department, whether local or out of state, can also play a role in how long it takes to stop. Also, every clerk’s office and sheriff’s office in each county handles garnishments differently. Issues arise and tend to arise often.
As you can see there are numerous moving parts to getting levies and garnishments released. Recently, however, an employee at the Polk County Sheriff’s Office commented that the method Marks Law Firm uses to get garnishments and levies released was the cleanest and most efficient that they have had to deal with.
Finally, there is the issue of whether garnished funds can be retrieved and given back to the client after they have filed for bankruptcy. One factor depends on how much money was seized through the garnishment. The amount of funds that can be claimed as exempt determines how much can be returned and given to you.
This of course adds an additional step to the equation.
Once the garnishment is stopped we must draft and have the bankruptcy trustee sign off on a motion to release funds. Client’s should be patient and understand that to get everyone to do what must be done takes time.
Marks Law Firm strives to explore every avenue which may benefit the client in our bankruptcy practice. Marks Law Firm has developed a system that allows us to regularly regain garnished and levied funds for our clients. If you are being garnished please contact Marks Law Firm immediately to explore what options may be available to you. The quicker you begin to work on getting garnished or levied funds returned the more success you will realize.