Can I Recover Garnished Wages? Is It Worth the Cost?

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In theory, you can recover garnished wages, provided that you listed them in your bankruptcy papers, exempt them, and the trustee assigned to the case takes no action to try to recover them. In other words, the trustee abandons any claim against those garnished wages. In that situation, if you have listed and exempted the garnished wages, then you can recover them.

There is, of course, the practical matter of how to recover them. In the Central District of California, there are two approaches depending on who the judge is. Some judges will let you file a motion to get an order to require the creditor to disgorge the garnished wages. However, there is a problem with that approach: Federal Rule of Bankruptcy Procedure 7001 says that an adversary proceeding is required to recover money. For that reason, most judges take the position that it must be done via an adversary proceeding.

Filing a motion is not a very complicated process, though the motion itself may be complicated in its drafting. You file the motion, and if there’s no opposition, the judge will grant the motion. Then the holder of the garnished wages must disgorge them.

An adversary proceeding, on the other hand, is a full-blown lawsuit, and typically costs between $10,000 to $30,000, sometimes even much more, depending on the behavior of the other side. If you’ve had a few hundred dollars garnished, doing an adversary proceeding makes no sense whatsoever. In fact, doing a motion to get the garnished wages disgorged is probably not worth the effort either because the cost of prosecuting the motion is going to exceed the value of the garnished wages.

Therefore, recovering garnished wages can be difficult in actual practice. I have, on occasion, been able to just call a creditor and say, “You’ve got this money. Would you give it back to my client?” They might say, “We’ll give some of it back, but we’ve had to expend some money in the process. How about we give you 50%?” This can sometimes be useful, and it does, of course, obviate the need for the expense of recovering in the Bankruptcy Court.

After Bankruptcy, Can A Creditor Ever Resume Garnishments?

Under a very special circumstance, the creditor can resume garnishments. If the debt in question was not discharged, then the liability is still there, meaning the creditor can resume the garnishment. If, on the other hand, the debt was discharged in the bankruptcy, then the permanent discharge injunction forever prohibits the creditor from trying to collect that debt again.

Let’s say you have a tax debt, and the IRS has been garnishing your wages. You file the bankruptcy petition, and the IRS complies with the automatic stay by stopping the garnishment. Then, you get your discharge. If that particular tax debt was not a dischargeable tax debt, the IRS can resume the wage garnishment. It depends, therefore, on the status of the debt after getting the discharge. If the debt was discharged, no further garnishment can take place. If the debt wasn’t discharged, then the creditor can resume the garnishment.

For more information on Wage Garnishments in California, a free 20 Minute Phone Strategy Session is your best next step. Get the information and legal answers you are seeking by calling (562) 777-9159 today.