A debtor filing for bankruptcy may be able to receive garnished wages back if they were garnished within the 90 day period before the bankruptcy case was filed, and if the amount was a total of $600 or more.
A person’s wages may be garnished if a creditor files a lawsuit and obtains a court judgment against the person to collect on that judgment. One of the most common ways a creditor may collect on a judgment is to garnish a person’s wages. In Minnesota, a creditor may garnish up to 25% of a person’s net pay. However, whether a debtor filing for bankruptcy has a legal right to demand the garnished funds returned back, depends on whether the debtor applies federal or state exemption law to protect their personal property in the bankruptcy.
In Minnesota, debtors have the option to use Minnesota state exemption law or federal exemption law to protect their personal property in the bankruptcy. If the debtor has a large amount of equity in their house, it is likely that Minnesota state exemption law will need to be applied to protect the debtor’s homestead. Under Minnesota state exemption law, $450,000 in equity of a homestead may be protected. However, under Minnesota state exemption law, a debtor does not have a legal right to receive garnished wages back. On the other hand, federal exemption law can protect $27,900 in equity of a debtor’s homestead. Therefore, if a debtor is renting an apartment or a house and does not own a house with a mortgage, and does not own any other real estate, it is likely that federal exemption law will be applied in their bankruptcy case. Likewise, if a debtor owns a house with little equity, in the amount of $27,900 or less, federal exemption law would be applied in their case. Under federal exemption law, a debtor does have the ability to receive garnished funds back in the amount of $600 or more, if they were garnished within the 90 day period prior to filing their bankruptcy case.
This is accomplished by using a federal statute, called the wildcard exemption provision, which can exempt up to $15,425 of miscellaneous items. If there is enough remaining of that $15,425, then the wildcard exemption statute can protect the garnished wages and the debtor’s wages that were garnished within the 90 days prior to filing, will be returned back.
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In summary, a debtor may receive garnished funds back while in bankruptcy. To learn more about the type of law that would be applied in your bankruptcy case, and whether you would be able to receive garnished funds back, come see us at our new office in St. Paul, Minnesota, or come visit us at LifeBackLaw.com!
