We were exploring the timing of a bankruptcy case, trying to live free in the house to be foreclosed while avoiding a garnishment on the working spouse’s wages. I was thinking about comparing the cost of a garnishment to the cost of renting a house: the client was thinking that a wage garnishment was forever!
Not so. Bankruptcy eliminates the right of any creditor to continue to collect on its debt. The prohibition requires that the creditor with a wage garnishment instruct the sheriff to cease withholding money from the debtor’s wages.
Further, the debtor may be able to recover from the creditor funds garnished in the 90 days before the bankruptcy case was filed, as a preference. (My experience is that preference actions over sums this small are seldom economic, however.)
The client was also worried that multiple judgments could result in multiple garnishments at the same time. Again, not so. California law permits only one garnishment in place at a time and caps what the garnishing creditor can take from each paycheck at 25% of after tax wages.
The world was a lot less scary place for the client after we found and destroyed another bankruptcy myth.
