In Tennessee, one of the primary methods that creditors use to collect debts is garnishment of a paycheck or garnishment of your bank account. If a creditor has obtained a judgment for the debt that you owe them they are allowed to take up to 25 percent of your take home pay in many cases. They also have the option of taking money from your bank account and can actually take whatever money that is in the account, up to the amount of the judgment debt that you owe them. The judgment in Tennessee generally will include the amount of the outstanding principal balance of the debt at the time of the judgment and court costs and attorney fees. The court costs is generally a little over a $ 100 and attorney fees are often 1/3 of the amount of the debt. So, if you had a $ 1000 debt the court will generally allow the collecting attorney to add $ 333 to the debt which now means you owe $ 1333 plus court costs.
Fortunately, bankruptcy will generally stop all collection efforts by a judgment creditor and in some cases even allow you to get back money that has already been taken from your paycheck or bank account. Section 547 of the Bankruptcy Code deals with what is called “a preference”. Basically a preferernce in Bankruptcy cases is where one creditor, i.e. the judgment creditor, may have received money before you filed bankruptcy and other creditors did not get their fair share. The Court feels that it is not fair for one creditor to receive special treatment, i.e. money, when other creditors get nothing. If fair is no one gets anything, then all creditors should be in the same boat. If a creditor takes from you by garnishment of your paycheck or by taking money from your bank account over $ 600 within 90 days of you filing bankruptcy, you often times can get the money back. There are other requirements, such as the Trustee must not be interested in the funds and you must be able to exempt the money in your Bankruptcy case. These requirements are generally met in most Bankruptcy cases due to the small amount of money involved.
The filing a Bankruptcy case pursuant to Section 362 of the Bankruptcy Code provides for an Automatic Stay of almost any collection activities against you such as garnishment of paychecks, etc… So even if the creditor has not taken $ 600 or more from you, you can still stop the garnishment immediately by filing bankruptcy as the filing acts as a Federal Injunction against most collection activities.
If you are being garnished or having to deal with other creditor collection problems, please feel free to give us a call and we will be happy to look at your situation and see if bankruptcy may be an option for you.
David E. Phillips
1/2016