Yes! You can get back money that was garnished from your wages (if the debt is dischargeable) if you file bankruptcy. In Mississippi, you can only recover garnished wages were taken within 90 days of your filing for bankruptcy and the amount taken was more than $600. You are not entitled to recover everything that’s been garnished if you’ve been garnished more than 90 days before you file bankruptcy; just the 90 day portion they took right before you filed bankruptcy. ***Keep in mind that filing bankruptcy STOPS a garnishment the moment the case is filed!
Depending on which kind of bankruptcy case you file and the amount, the money may go back to you or it may go to the Trustee. But either way, it’s beneficial to you. How would it be beneficial for it to go to the Trustee? Keep reading. I’ll explain!
Example #1: You have been garnished for the past 2 months for a total of $800 and you file a Chapter 7 bankruptcy tomorrow. The first two criteria are met (within 90 days and over $600) so you stand to regain all $800.
Example #2: You have been getting garnished for 6 months for a total of $1,500 and you file a Chapter 7 bankruptcy tomorrow. You’re qualifying but only the portion taken within 90 days will be eligible – which lets say totals $700. The creditor is entitled to keep the other portion ($800).
Example #3: You were garnished, but the garnishment stopped over 4 months ago and you file a Chapter 7 bankruptcy tomorrow. The garnished wages cannot be recovered because none of the money was taken from you within 90 days of filing your bankruptcy case.
Example #4: You were garnished last week for $250 and file bankruptcy tomorrow. Yes, it’s within 90 days but it’s less than $600. The garnished wages cannot be recovered.
Ok, back to the question of where the recovered wages or money will go based on the type of bankruptcy filed. Whether it is a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, under the Bankruptcy Code, your Trustee has the right to claim the money; however, they usually they won’t make a claim unless the amount is $2,000 or more. Assuming no claim is made by the Trustee, the money goes back to you. If there is a claim made by the Trustee, the money will go to the Trustee who will then divide and spread out the money on a pro-rata share among your unsecured creditors as payment toward your debt. This ensures that there is no preferential treatment when it comes to who you owe and the amount they are paid and/or not paid through your case.
The recovery of the wages or money would not take place immediately after the filing of your bankruptcy case. Once your case is filed, you would first attend the 341 meeting, which is set to occur approximately 30 days after the date of filing. After this meeting is held, the request for the recovery of the funds would be issued to the creditor. The Trustee would be copied on this request and given time to assess whether or not they desire to assert a claim. In most cases, the Trustee will let us know at the 341 Meeting of Creditors that he would not be making a claim on the garnished wages. The creditor would also be allowed a small amount of time to issue the refund. A fair estimate of when to expect to receive the recovered money would be +/- 60 days from the date of filing.
If you’re dealing with garnishment issues, please call and we can have a strategy session that will give you the information you need to decide what is best for you.