Wage garnishment is a very serious matter because so many Minnesotans live paycheck-to-paycheck. About half of Minneapolis families cannot pay a $400 emergency expense. The really bad news is that this figure is actually lower than it was a few years ago! As outlined below, Minnesota has very aggressive wage garnishment laws. As a result, after just one or two missed payments, many people are caught in a financial vice.
Just like it does in home foreclosure and many other situations, bankruptcy gives families both short-term and long-term solutions to wage garnishment issues. In this way, families really do get the fresh financial start which they deserve and the Bankruptcy Code guarantees.
An Overview of Minnesota Wage Garnishment Laws
To obtain wage garnishment court orders, most moneylenders simply need to argue that garnishment is the best way for them to get paid. Most judges dismiss debtor hardships with a “just pay your bills” mentality.
Moreover, in some “small account” cases, the moneylender does not even need a court order. A simple notice to an employer is good enough to begin wage garnishment in areas like:
- Defaulted student loans,
- Past-due child support, and
- Delinquent taxes.
A garnishment proceeding is usually not a trial. For example, the bank may not need to prove that it legitimately declared the student loan to be in default. It just needs to show that it took such action, whether that move was fair or unfair.
Minnesota creditors can garnish up to 25 percent of net earnings. This is all money which is left over after paying taxes and any mandatory fees.
Lots of people ask “Can I be fired over a wage garnishment order?” Compliance with these orders is a hassle, so many employers look for a way to take such actions. Minnesota law technically prohibits such actions. However, the law is a little vague. So, the law may or may not protect you in these situations.
Wage Garnishment and Chapter 7
The automatic stay flatly prohibits wage garnishment. Section 362 is one of the most powerful tools in a Minneapolis bankruptcy attorney’s toolbox. And to invoke it, the debtor just has to file a petition. There’s no need to show hardship, fraud, inequity, or anything else.
Section 362 goes into effect immediately and remains in effect for as long as the case is pending, in most cases. Furthermore, once the case is over, the moneylender cannot simply begin siphoning funds from your paycheck as if nothing ever happened. You get a fresh start. So, the moneylender must start over, and that usually means going back to court.
By the time the judge signs the discharge order closing the case, wage garnishment may no longer be an issue in Chapter 7 cases. Most unsecured debts, like credit cards and medical bills, are forgiven. The moneylender no longer has the legal right to collect the debt, and that means no more wage garnishment.
Even some of the streamlined garnishable debts mentioned above are dischargeable in some cases. Student loans are a good example. The Eighth Circuit Court of Appeals, which includes Minnesota, has significantly relaxed the Bankruptcy Code’s undue hardship rule. So, most student loan debtors may be entitled to at least a partial discharge.
Wage Garnishment and Chapter 13
A repayment plan bankruptcy may provide even more protection in wage garnishment cases. First, a Chapter 13 lasts up to five years, in most cases. So, the automatic stay remains in effect longer. Second, Chapter 13 debtors have more of a chance to catch up on past-due accounts. At the end of the repayment period, if there is no more delinquency, there is no more wage garnishment. Talk to an experienced attorney about which type of bankruptcy is best for your family.
Furthermore, during bankruptcy, many disputes are resolved in the debtor’s favor. Let’s go back to the earlier example about wrongful garnishment. To re-start garnishment after bankruptcy, the bank must convince either the judge that the underlying debt cannot be discharged in the bankruptcy case. This procedure applies to both judicial and nonjudicial garnishment procedures. So, debtors in bankruptcy have even more protection from predatory moneylenders.
Bankruptcy stops wage garnishment both today and tomorrow. For a free consultation with an experienced bankruptcy attorney in Minneapolis, contact Kain & Scott. Convenient payment plans are available.
