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Creditors have multiple tools to enforce a debt. If you’re behind on paying some of your bills, you may have started receiving phone calls, letters, or e-mails from debt collection companies seeking repayment. When those collection attempts go ignored and unanswered, many debt collection agencies and creditors will escalate the reclamation process to the next level, wage garnishment.
When your hard-earned income is reduced due to court-ordered wage garnishment, you may easily find yourself short on funds to pay for groceries, utility bills, or other daily essentials in Fort Collins. Fortunately, there are methods to terminate a wage garnishment, and filing for bankruptcy is one of the most cost-effective and fastest ones.
Over the years, our Fort Collins bankruptcy attorneys have been asked many questions related to bankruptcy and wage garnishments. Some of those questions have been routine, others, much more complex.
Several questions are asked by almost every client who wants to file bankruptcy for relief from wage garnishments. These “frequently asked questions” are usually based on wrong information the client has heard from a friend of a friend, or on a television show.
In order to clear up some of the confusion about wage garnishments and bankruptcy, our Larimer County area debt relief attorneys have answered a few of the most commonly asked questions about wage garnishment and bankruptcy.
What is wage garnishment?
We know that you work hard for your money in Fort Collins. But the income you earn from your job can be taken away if you owe unpaid debts. In Colorado, certain creditors can garnish your wages, forcing your employer to take a not-insignificant chunk of your paycheck and put it directly into the hands of those creditors.
How Can a Creditor Garnish My Wages in Larimer County?
Most garnishments are court-ordered. That means that when other debt-collection methods have failed to provoke repayment, a creditor will then sue you in court. If the court rules in favor of the creditor and finds that you owe the creditor money, the court will issue a judgment in favor of the creditor against you for the amount that you owe. Your creditor will then ask permission from the court to garnish your wages to get the money you owe. If permission is given, a garnishment order will be sent to your employer requiring him to take the garnishment amount out of your pay before giving you the remainder of your check.
It’s worth noting that some debts do not require a court order to garnish wages in Colorado. If you owe student loans, tax debt, child support, or alimony, these creditors can garnish your wages for repayment without a court order in Fort Collins.
How much can Colorado garnish my paychecks for?
In Colorado, your paycheck can be garnished up to 25% of your income after taxes and social security, or the amount by which your disposable earnings for a week exceed 30 times the state minimum wage. It’s worth noting that these figures do change depending on what type of debts your wages are being garnished for.
For example, the US Department of Education can only deduct up to 15% of your paycheck for student loan debt repayment. To go over the various amounts of deductions allowed through wage garnishment in Colorado, please contact our Fort Collins debt relief lawyers for more information.
What wages can be garnished in Colorado?
Most types of wages can be garnished. These include:
However, it’s worth noting that only your disposable earnings are subject to garnishment. Disposable earnings are what is left after you subtract legally required deductions from an employee’s wages, such as federal, state, and local taxes.
How can bankruptcy help with wage garnishment?
If you can’t work out a reasonable payment plan with the creditor or can’t afford to make payments at all, you may be able to avoid or stop a wage garnishment by filing for Chapter 7 or Chapter 13 bankruptcy in Fort Collins.
These two types of bankruptcy are very different, but they have one important thing in common. In most bankruptcy cases, a court order called “the automatic stay” is entered as soon as you file your bankruptcy petition. This order tells creditors and others to stop any collection action against you. If the creditor hasn’t yet gotten a judgment against you, the automatic stay can prevent them from going to court, meaning that no garnishment order is entered, and if your employer is already withholding money to satisfy a writ of garnishment, the automatic stay forces them to stop.
For petitioners seeking to file Chapter 7 bankruptcy in Colorado, the entire process from start to finish is relatively quick, lasting between four to six months. During Chapter 7 bankruptcy, which is commonly referred to as simple bankruptcy or liquidation bankruptcy, a court-appointed bankruptcy trustee collects all of your assets and sells any assets which are not exempt. The net proceeds of the liquidation are then distributed to your creditors. Whatever unsecured debt remains after the liquidation is then discharged by the court.
Chapter 13 bankruptcy, also called a wage earner repayment plan, or reorganization bankruptcy is unlike Chapter 7 in that this form of bankruptcy requires that a debtor repay a fixed, monthly amount to his or her creditors by making a single payment over a 36 to 60-month plan. This single monthly payment is often less than the total monthly sum of all of your bills put together. If you can stick to the terms of your repayment agreement, all your remaining dischargeable debt will be released at the end of the plan.
It’s important to note that certain debts cannot be discharged through bankruptcy, such as alimony, child support, fraudulent debts, certain taxes, and student loans. If your wages are being garnished for any of the above reasons, the garnishment will continue as soon as your bankruptcy debt has been discharged. Additionally, since those debts cannot be discharged by bankruptcy, those creditors are not beholden to the automatic stay and can continue to garnish your wages even during the bankruptcy.
If these common wage garnishment and bankruptcy questions haven’t provided the answers you need, don’t hesitate to reach out to our experienced and knowledgeable Fort Collins bankruptcy attorneys. Our staff of helpful legal professionals would be more than happy to answer any questions or concerns you have regarding bankruptcy and wage garnishment during your free case consultation.
Facing wage garnishment can be distressing if you’re a Larimer County resident already in financial trouble. Lessening the amount of money you take home in each paycheck can make you fall even further behind on your bills, leaving you feeling hopeless. If you’re having issues with wage garnishment, talk to an experienced Fort Collins bankruptcy attorney to discuss your options. We offer a free case consultation for prospective clients where we can discuss your financial issues and help you find the best debt relief option for your circumstances.
With decades of combined experience handling the most complex bankruptcy cases in Colorado, we are well equipped to help you get a fresh start financially. Imagine putting an end to the harassing phone calls from creditors, the threat of having your car repossessed, and the risk of losing your home to foreclosure. Imagine once again having a healthy credit score and knowing that you will have no trouble paying your bills every month.
Turn this dream into a reality by contacting our law office today.