Are you struggling with debt? If so, you’re not alone. At the end of the 2021 third quarter, Americans owed $806 billion in credit card loans.
Student loans pose another significant source of consumer debt. In Pennsylvania, residents owe an average of $33,426 for private and federal loans.
The PA Department of Revenue has the authority to garnish wages for unpaid taxes. They’re allowed to withhold as much as ten percent from your earnings. Other agencies may also get a court order to use wage garnishment to collect the debt.
So, how can you stop wage garnishment in Philadelphia? One option involves filing bankruptcy. Keep reading to learn more about this approach.
What Is Wage Garnishment?
State or court-ordered wage garnishment means that part of your paycheck is withheld. The employer sends this money directly to the agency where you have an unpaid debt. This continues until you’ve paid the total amount due.
How Can You Stop Wage Garnishment?
There are several ways to stop wage garnishment. You can negotiate a payment plan with the creditor.
In some states, you can ask the court to appoint a trustee. You pay the trustee, and they distribute your payments.
There are also states that allow residents to claim economic hardship. If you’re granted this claim of exemption, your wages aren’t withheld.
Seeking Consumer Credit Counseling Services may help stop the garnishment. But the creditors must agree to this arrangement, and you must pay on time.
For many people, the best approach is to file a bankruptcy case. You’ll need to start by talking with a wage garnishment attorney.
Once you’ve filed for bankruptcy, an automatic stay begins. This means that all creditors must stop all collection activities. Only the bankruptcy court has the power to lift this stay.
It’s key to know that once the bankruptcy case concludes, the stay ends. Creditors may resume collection activity for any unpaid debt. Also, if you file further bankruptcy cases, you may not receive a stay.
There are three types of bankruptcy filings. Your attorney will explain which option is best for your situation.
Chapter 7 Bankruptcy
Individuals, partnerships, corporations, or other business organizations may qualify for Chapter 7 bankruptcy. You can’t file unless you’ve undergone credit counseling from an approved agency in the past 180 days. If you’ve had a bankruptcy case dismissed for noncompliance with court orders within 180 days, you’re ineligible.
Your attorney will calculate your “means test” to determine if you can file Chapter 7. This test decides if you or your family has the financial ability to meet basic needs without help. This determines eligibility for government assistance, welfare, and bankruptcy.
With Chapter 7 bankruptcy the court will appoint a trustee. This person collects and sells your non-exempt assets to pay your debt. Your property may have a lien or mortgage placed on it that pledges it to the creditor.
Filing for Chapter 7 bankruptcy involves completing the following steps:
Gather Information and File Forms with the Court
Provide bank statements, bills, pay stubs, tax returns, and retirement and investment forms. Complete an approved credit counseling course.
Your attorney will complete the Chapter 7 forms. Then they’ll file them with the court. The attorney will also submit your certificate of completion form for credit counseling.
Attend the 341 Meeting
After the court gets the forms, they tell the creditors that you’ve filed bankruptcy. A “341 meeting” is then scheduled.
The attorney will submit all your financial documents to the bankruptcy trustee. This must take place at least seven days before the first 341 meeting.
You, your attorney, the trustee, and the creditors attend the 341 meeting. The trustee and creditors will question you under oath.
They’ll ask about your assets and liabilities. The bankruptcy attorney will advocate for you throughout this meeting.
Complete a Debtor Education Course
Your next step is to take a debtor education course once you’ve filed and received a case number. You’re required to finish and submit your completion certificate within 60 days of the 341 meeting.
The Court’s Decision
The court will give its initial ruling about whether they’re erasing all your debt. All creditors have 60 days to raise objections to the court’s decision.
Then the court will hear, consider and rule on any objections put forth. After 60 days, if there are no objections, the court will dismiss your debt.
Chapter 13 Bankruptcy
Almost all Philadelphia residents may file for Chapter 13 bankruptcy. Yet, if you have over $394,725 unsecured and/or over $1,184,200 in secured debt, you’re not eligible. If you’ve filed Chapter 13 bankruptcy within 180 days and not complied with the court, you’re ineligible.
The goal of Chapter 13 bankruptcy is to set up a manageable payment plan over three to five years. It’s not intended to erase your debt.
All secured loans, including car payments and mortgages, must be caught up or paid off. For debt, such as credit cards, you only have to pay part of it. Once you’ve followed the repayment plan and reached five years, the balance will be erased.
Document Your Finances
It’s important to speak with a bankruptcy attorney, so they can help you through the process. When filing this type of bankruptcy, you’ll submit details about your financial status. This includes:
- A complete accounting of all the money you owe
- A list of all the properties you own
- All liabilities and assets, as well as your current payments
- All unexpired leases or executory contracts
- Monthly income and bills, such as utilities, car payments, food, and clothing
- Recent tax returns
You must provide a comprehensive statement describing your financial situation. Also, you’re required to create and submit a repayment plan with your petition within 14 days. The attorney can help you with this.
The court will appoint a trustee to manage your case. Once the case concludes, the trustee collects all payments.
It’s their responsibility to forward them to the creditors. In Philadelphia, after filing bankruptcy, you won’t directly interact with the creditors.
Attend an Informal Meeting
In the next 21 to 50 days after filing, the trustee meets with you and the creditors. Your attorney will also be present, and both you and your spouse must attend. In this informal meeting, they’ll answer questions about your finances.
Complete Mandatory Courses
Within 180 days before you can file for bankruptcy, you must attend credit counseling. You may create your debt repayment plan during this course. Upon completion, you’ll get a certificate which you must submit to the court.
Pay Filing Fees
To file a bankruptcy claim, you must pay a $235 filing and $75 miscellaneous administration fee. If you can’t afford to pay this, the court may let you make four payments over 120 days. The court can extend this time to 180 days if necessary.
Closing the Case
Within 45 days after the creditor meeting, the court holds a hearing about the repayment plan. They’ll decide if it’s sensible and legal. The creditors have the right to object if they feel the plan isn’t fair.
After deliberation, the court will either ask for a revised plan, confirm the plan, or dismiss the case. If your plan is approved, make sure you follow it diligently. The goal is to leave this bankruptcy with a clean slate to rebuild your credit.
Chapter 11 Bankruptcy
Only businesses are eligible to consider filing for Chapter 11 bankruptcy. This process strives to reorganize the business’s debts, assets, and financial approach. You may hear this called “Reorganization” bankruptcy.
Most organizations choose this option to give them time to fix financial problems. Their goal is to get a fresh start.
As with other types of bankruptcy, you’ll want to have an attorney assist you through the process. Chapter 11 bankruptcy involves the most complex proceedings.
During the restructuring, the company can keep its business open and meet its obligations. If the business develops a reorganizations plan, it must benefit the creditors. When the debtor doesn’t propose a plan, the creditor will create one.
Do You Need to Hire a Lawyer?
The article provided a comprehensive guide to ways to stop wage garnishment. For many people, bankruptcy provides them with the time needed to pay their debts. Brad Sadek is a Top Bankruptcy Lawyer with the Sadek and Cooper firm in Philadelphia.
Our office is conveniently located close to most mass transit lines. We’re also easily accessible by car. Our debt relief lawyers serve clients throughout the Greater Philadelphia, PA area.
We take time to listen and learn about your unique situation and goals. Then we work with you to develop the best debt relief strategy for you. Schedule a free consultation today to start your path to financial freedom.