Wage and Bank Account Garnishment and Bankruptcy

I often hear from prospective bankruptcy clients that their wages, paycheck, or bank account have been garnished. In order for a garnishment to be issued in Colorado a judgment must first be entered against the debtor. I ask the prospective client if they recall being served with a summons and complaint. In many cases the debtor is unaware a judgment entered against them even though the judgment creditor must show the debtor, or an adult member of the household, were handed the summons and complaint. In most cases a judgment entered because no response to the complaint was filed, or a payment stipulation was entered in court which the debtor defaulted.

Effect of Garnishment on Bank Accounts

If a bank account is garnished as a result of a Colorado judgment,  the entire amount in the account is frozen and the debtor is sent notice of the garnishment. The judgment debtor then has an opportunity to dispute the bank garnishment by filing an objection with the court. Objections fall under two categories. One,  the judgment was entered illegally. Two, that the funds on deposit are exempt from levy. An example of a partial exemption is wages. Only 20% of net wages can be garnished. Hence, if you can prove that funds in the bank account are the result of deposits from wages, then you can keep 80%. Social Security benefits are 100% exempt. So, if you can show the bank account funds are derived from social security benefits, you keep it all.

Effect of Garnishment on Wages

If an employer receives a wage garnishment, the employer will take 20% of the net wages that were due the employee and send it to the judgment creditor. Less will be taken out if minimum payment levels have not been met. Objections to the wage garnishment are limited. The judgment debtor may claim the judgment was illegally entered. Or the debtor may claim the calculation of the amount taken out was determined incorrectly.

Bankruptcy Stops the Garnishment

The most effective way to deal with a bank account or wage garnishment is the filing of a bankruptcy petition. The filing of a bankruptcy petition results in an automatic stay which stops any further action on the garnishment. In many cases, the money saved from stopping the garnishment more than pays for the cost of the bankruptcy.

With over 35 years of experience call or contact LONG & LONG P.C.  now at 303-832-2655.