Creditors will often engage in aggressive tactics to communicate with you regarding debt, including calling you at home and contacting you at work. However, there may come a time when a creditor takes legal action that could have a significant impact on your finances and future. By going through the proper process, a company can get an order from a Michigan court that takes part of your earnings to satisfy the debt you owe. The matter is termed wage garnishments in Detroit, and it is one of many options a creditor has to get paid.
Fortunately, when you file, bankruptcy stops wage garnishments in Detroit. The automatic stay is an order imposed by the bankruptcy court that prohibits creditors from engaging in collection efforts. The ban on creditor activities applies to both Chapter 7 and Chapter 13, giving you protection in both types of cases. Still, there are some crucial rules to know about garnishing wages. Plus, some creditors can take multiple types of legal action, even if it does not involve wage garnishment. It is smart to count on a Detroit bankruptcy attorney for assistance with your case and read on for some background on the automatic stay in Chapter 7 and Chapter 13.
Wage Garnishments in Detroit and the Bankruptcy Automatic Stay
Bankruptcy is the process through which an individual or married couple can discharge debt. The steps for eliminating debt are distinct for Chapter 7 versus Chapter 13, and there are rules regarding eligibility for each. Depending on whether you meet the criteria and how you decide on your options, the court will take immediate action that gives you an advantage against your creditors. The US Bankruptcy Code provides for an automatic stay on creditor activities as soon as you file your petition for Chapter 7 or Chapter 13. In other words, creditors are prohibited from engaging in efforts to collect the debt. No matter where they are along their process for pursuing you, they must cease.
Wage garnishments are one of the most common ways creditors try to get payment from you. The company goes to court to obtain an order to garnish your wages, and your employer is required to comply. The amount is taken out of your paycheck before you receive it.
Exceptions That Affect Bankruptcy Cases
Despite the automatic stay, bankruptcy laws include some exceptions that could allow a creditor to seek payment on a debt. These are nondischargeable debts, and they will remain after you discharge debt through Chapter 7 or Chapter 13. Examples of debts you cannot eliminate in bankruptcy include:
- Child support payments;
- Certain types of taxes;
- Amounts you owe a court for a criminal or civil case; and,
- The judgment for a personal injury lawsuit after a DUI accident.
If you have secured debts, these cannot be discharged in bankruptcy because the creditor can seek payment through the collateral you have pledged. Your mortgage is secured by your home as collateral, so the lender could foreclose. Your wages will not be garnished through foreclosure, but it is possible you could lose your home without a solid strategy.
There is also an exception that covers discharging student debt, which is challenging but not impossible. You would have to file a separate process to determine whether extreme hardship was a cause of your financial situation.
Overview of the Bankruptcy Process
Chapter 7 and Chapter 13 bankruptcy are very different cases, enabling the filer to discharge qualifying debt after going through the necessary steps. The proceedings are similar in many ways and work as follows:
- Collect and organize financial documents reflecting assets, debts, expenses, and income.
- Complete the credit counseling course that is required within 180 days of filing.
- Prepare the bankruptcy petition and schedules.
- File documents for Chapter 7 or Chapter 13
- The automatic stay on creditor collection efforts goes into effect.
- Participate in the meeting of creditors, during which you will answer questions about the information provided on your petition.
- Complete all requirements for Chapter 7 or Chapter 13.
- Obtain the bankruptcy discharge order.
Comparing Chapter 7 and Chapter 13
Knowing the bankruptcy steps is a good start, but you will need some basics to realize the differences between the types of cases.
Chapter 7: This case results in the discharge of your debts without having to pay back what you owe to creditors. However, you must meet the strict eligibility rules. You automatically qualify if your earnings are less than the state median income for your household size. Those who earn more may still be eligible under the Means Test that evaluates income and expenses.
The downside of a Chapter 7 case is that your assets are at risk of liquidation by the bankruptcy trustee. You may not have to pay your creditors back, but the trustee will attempt to satisfy your debt by selling your real estate and personal items. Fortunately, you can apply exemptions to protect your interests.
Chapter 13: With this type of bankruptcy, you can also obtain a discharge of your debts. Chapter 13 provides that you still satisfy your debt to creditors, but you do so through a debt repayment plan. There is no liquidation, so your assets cannot be sold.
With Chapter 13, your debts are reorganized and structured into a monthly amount that you can afford to pay. For this reason, you must meet the primary eligibility rule, which is having a job. You complete the debt repayment plan within 3 to 5 years, at which point dischargeable debts are eliminated.
How a Lawyer Can Help With Wage Garnishment in Detroit
Wage garnishment in Detroit could take up to 25 percent of your disposable income or 30 times the minimum wage. Legal representation from a Detroit bankruptcy lawyer is essential to avoid wage garnishment because you can get started and trigger the automatic stay right away. To learn the rules might take you months, during which time creditors may attempt and succeed in garnishing your wages.
Your Michigan bankruptcy attorney will move promptly and set the foundation for your case, carefully going over paperwork while preparing the petition. Once filed, the automatic stay terminates garnishing wages.
Set up a Consultation with a Detroit Bankruptcy Lawyer Right Away
As you can see, retaining a skilled legal professional is essential if you are considering Chapter 7 or Chapter 13. Filing either type of bankruptcy will stop wage garnishments in Detroit, as well as deliver many other benefits. To learn more, please contact Kostopoulos Bankruptcy Law to speak to a member of our team. We can schedule a case assessment with a Michigan bankruptcy attorney who will review your situation and explain the laws.
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