If you’re struggling with your finances, you’re not alone. Last year, 779,828 households filed for bankruptcy in the United States. Many of these people found themselves in financial trouble due to circumstances that weren’t entirely their fault.
Unfortunately, couples often find themselves in dire financial straits after filing for divorce. Others suffer losses from failed business ventures or have their savings wiped out by unexpected medical bills. Whatever the reason for your financial woes, you’ll be happy to know that bankruptcy isn’t the only solution.
Before you give up, check out these five tips for preventing bankruptcy and getting your financial life back on track.
1. Set (and Stick to!) a Super-Strict Budget
Keeping track of where your money goes is really the only way to dig yourself out of debt. To do this, you’ll need to set a super-strict budget and write down exactly what you spend every day.
Make sure you have enough money to pay your rent or mortgage and necessary expenses like electricity and food. Beyond that, plan to put every penny you can towards paying off your outstanding credit card and loan balances.
2. Sell as Much as You Can
We often don’t realize how much stuff we have until we take an honest look around. If you truly want to get out of debt, make it your priority to sell everything you can. Start with higher-value items like electronics, handbags, and furniture you don’t necessarily need.
Depending on how serious the situation is, you might need to make big moves like selling jewelry, your car, or even downsizing your home.
3. Increase Your Income
Cutting expenses is only half the equation. Finding ways to earn more money will also help you get your finances back on track.
Take an honest look at your current job and decide whether it’s feasible to ask for a raise. If not, consider looking for a job that will pay you better or resign yourself to picking up a second job or side gig.
4. Seek Help from a Bankruptcy Professional
If you can’t see the light at the end of the tunnel, seek the advice of a financial advisor who specializes in bankruptcy prevention. He or she will help you determine whether you have the potential to dig your way out.
If things don’t look good for you, remember that filing for bankruptcy without a lawyer is a dangerous move. Spend the money to work with a professional so you don’t end up making things worse.
5. Rebuild Your Credit
Digging yourself out of a potential bankruptcy is no easy task, but it can be done. If you’re starting to get back on track but notice that your credit has suffered, you’ll want to work on building it back up.
Companies like CardGuru can help you find the best credit card offers for poor credit. Use your new card at least once a month and pay it off right away. This will help you re-establish yourself as a responsible borrower.
Talk to a Bankruptcy Lawyer Before It’s Too Late!
When your finances start to spiral, being proactive can make a huge difference. Before things get too bad, search for a bankruptcy lawyer near you and schedule a consultation. This is a case where it’s well worth the time and effort to fully analyze your situation before making any major decisions.
In my years as a workout officer for the largest SBA lender in the country, borrowers filing for bankruptcy was par for the course. Whenever you combine lots of money owed with little chance of paying it back, the prospect of bankruptcy in one form or another is always lurking.
If you are facing an SBA loan default because you or your business can’t afford the payments, chances are that bankruptcy has crossed your mind. Today, I’d like to cover the most common questions that borrowers ask when it comes to an SBA loan default and bankruptcy.
Can an SBA loan default be discharged in bankruptcy?
Yes, I’ve seen plenty of chapter 7 BK filings as a workout officer. As a consultant, I’ve also had my fair share of clients who retained me to after a BK. The reason they retained me was because despite having their personal guarantee released, the lender still had a lien on their home.
Wait, A Bankruptcy Doesn’t Get The Lien Released?
So while a personal guarantee can be discharged, a lien on your personal residence will remain intact if there is equity in your home. This is an important fact to know, as I’ve received calls from more than one upset borrower who only learned that the lien stayed in place AFTER they went through the BK.
For many borrowers with equity in their home, but without much else in the way of personal assets, each of these scenarios may result in a similar cost:
- File a BK, then negotiate a lien release after the fact, or
- Negotiate an SBA loan default Offer In Compromise (OIC) and have a release of the lien be included as part of the OIC.
If it’s going to cost the borrower the same, most people would just as soon avoid having a BK on their record.
When’s the best time to seek a lien release following a bankruptcy?
I generally believe that the sooner you do it, the better. There are a couple of reasons why I recommend this:
- While the real estate markets can experience declines here and there, over the long term real estate has historically increased in value over time. If your home is worth $300K today, it’s likely to be worth more 5 to 10 years from now. If you attempt to negotiate a lien release when your home is worth more, there will be more equity and therefore it will cost you more to have that lien released.
- As long as you continue to pay down your mortgage, you will continue to build equity in your home (assuming the value of your home increases or stays flat). As in the point above, the less you own on your first mortgage, the more equity in the home.
The bottom line on lien releases is this: the more equity you have in the home, the more the bank will demand from you in order to release it. In general, equity increases over time due to rising prices and paying down your mortgage, which means the longer you wait, the more it’s likely to cost you to negotiate a lien release. Lenders negotiate based on equity that exists today, so you should use that to your advantage.
Jason Milleisen is the founder and owner of Distressed Loan Advisors (JasonTees.com). Since 2009, DLA has helped hundreds of small business owners through the SBA Offer In Compromise process, resulting in over $50 Million saved. Jason is a former workout officer for the largest SBA lender in the US, where he oversaw a $400 Million portfolio of delinquent SBA loans.
Are you considering filing bankruptcy?
If so, you’re not alone. Over 700,000 people file bankruptcy a year in the United States.
If you’re having serious financial issues, don’t file your own bankruptcy. Check out five of the most dangerous pitfalls of filing bankruptcy without a lawyer.
1. Understanding the Paperwork
When you’re filing bankruptcy on your own, you may struggle to properly understand and complete all the necessary paperwork. The paperwork is quite lengthy and you want to ensure that it’s all done correctly.
Without an attorney, you will be left to figure it all out on your own. Having someone who understands these proceedings like a lawyer will make sure that you file the proper paperwork right away. If you don’t file all the paperwork correctly, you risk your case being dismissed.
2. You’ll Receive More Oversight From the Courts
When you don’t have a lawyer while going through bankruptcy proceedings, you can expect extra attention from the courts. The trustee and others associated with your case will want to make sure that you have correctly presented everything.
With that being said, you can expect the process to take longer when you file pro se.
3. Knowing How to Handle Contested Disputes
When filing bankruptcy without an attorney, you may not understand how to correctly handle contested disputes.
You want and need an attorney like https://rodneyokano.com/bankruptcy-lawyer-las-vegas/ that you can trust to handle these disputes. You will not receive special treatment just because you are representing yourself, therefore you should have proper representation.
If you experience these disputes, you need an experienced lawyer who can defend you through the proceedings.
4. Using Bankruptcy Exemptions Incorrectly
Bankruptcy exemptions are items that a debtor can usually keep. Items such as household items, reasonable clothing items, and pensions. It’s important to know what exemptions you can and cannot claim.
This is not a time to play guessing games. Proper research must be done to make sure that you fully understand bankruptcy exemptions. Having a bankruptcy attorney can help you with this process.
5. Not Following the Rules After You File
Filing for bankruptcy involves more than just filling out the paperwork. There are certain things to do after you file bankruptcy. You will be required to attend a 341 meeting. During this meeting, you meet with the trustee and potentially your creditors to discuss the debts owed.
It’s important to know and understand that you may be required to attend credit counseling or another type of debt education course in order to receive your bankruptcy discharge.
Filing Bankruptcy without a Lawyer Isn’t Ideal
Facing your financial difficulties is not something that you should have to do on your own. Instead of filing bankruptcy without a lawyer, team up with an experienced attorney to ease your mind and ensure everything is handled properly.
Instead of wondering how to file bankruptcy yourself, hire an experienced attorney. Browse our legal category page to find the right lawyer near you.
There are many people out there who suffer from financial struggles, and their situation is so bad, that bankruptcy is required. If you’re not sure if you need to file for bankruptcy, then you might need to talk to a bankruptcy attorney. Attorney Jed Shaw can help and guide you in this matter, and will tell you all of your options. Don’t listen to people who don’t have expertise in this field, their pieces of advice might get you to a worse place.
We’ve written this article to help you understand the signs you need for filing for bankruptcy.
You have a high credit card balance
A credit card can be very useful, if you want to finance your lifestyle, but for a short period of time. And it’s easy to pay the minimum balance for a few months. But once that balance surpasses, it’s not so fun anymore. And paying the entire balance is not realistic. If your credit card balance is high and you cannot pay it off, then you might need to get contact of a bankruptcy lawyer.
Also, if you’re using your credit card to have the basics until the next month, is time to call your attorney. Once this happens, a cycle starts to happen, and it can be very hard to break it without influencing the balance of the credit card.
Many people believe that if they make the minimum payments with the credit card, then it’s not necessary to bring an attorney to the discussion. It actually is, since the majority of the payments that you make with that card cover the interest for that month. We advise you to see your attorney as soon as possible.
You swim in unsecured debt
Medical treatments are usually the ones we talk about when it comes to unsecured debt. Also, divorce, or business-related debt is subject to International Debt Collection. The reason is not that important, as it is the fact that you have a lot of unsecured debt and no money to pay it off. That’s when you know you need to talk to a lawyer. Chapter 7 can change your life in this situation.
Also, if you have lost your job, it means you have to deal with lower income – even if it’s for a short period of time, until you get a new job. You might have to get a credit card or a high-interest loan, thing that gets us to what we have discussed just above. If you’re using those to survive month to month, then you need to find a lawyer to help you.
Get money from your retirement
This is never a good idea. Don’t take money from there to pay the debt you have. You don’t really save much for retirement as it is, so it will only make things worse if you decide on this. Instead of taking all of the money – years of money – to repay your dischargeable debts, you’d better keep saving for retirement.
Repossession or foreclosure
In case you’re about to lose your house or your car to foreclosure or repossession, then you might want to call a bankruptcy attorney. After the bankruptcy petition is filed, then both the repossession and foreclosure should stop. This is known as “automatic stay” in bankruptcy.
A lawyer can save your house from this situation by making the most out of Chapter 13 – this one allows you to organize your debt and enter a payment agreement for about five years, a period of time in which creditors cannot repossess or foreclose.
You can keep your house if you catch up on mortgage payments. Under no circumstance should you wait for the last minute to talk to your lawyer.
The creditor harasses you
When creditors call you all day long, every day – because it happens a lot – and sending you threatening letters or keep harassing you about your debt, then it’s time to talk to a lawyer. If you file for bankruptcy, then you’ll stop these forms of harassments. It will stop all of the callers from calling you or sending scary letters.
If you’ve been sued, or you’re about to be sued, then you clearly need to talk to an attorney. After you don’t pay the money anymore, it’s just some time until the creditors sue you. And after you’ve been sued, the outcomes might be ugly, your bank account might be levied, or a lien might be placed on your home.
If you get a lawsuit, or a letter from the creditors telling you they’re going to file a lawsuit against you, then call your attorney as soon as possible.
Being in great debt can be a scary thing. When you can’t repay all your outstanding debts, you’re more likely experiencing bankruptcy. You’ll receive a bulk of collection calls that can give you anxiety. In this situation, it’s best to consider the idea of filing for bankruptcy if you want to get out of too many financial worries. However, you have to understand that the process can be very complicated. That’s because bankruptcy law has changed over the years.
If declaring bankruptcy is your best financial option, here’s everything you need to know about the bankruptcy law.
- Bankruptcy is a time-consuming process.
Whether you believe it or not, bankruptcy can be a time-consuming process. If you’re inexperienced with how bankruptcy laws operate, the first thing to do is to understand your options. Here are some bankruptcy options to consider:
- Chapter 7 Bankruptcy – This is the most common bankruptcy option for individuals that release most of their personal unsecured debt, such as credit cards and personal loans. This process will more likely last for about three to four months.
- Chapter 13 Bankruptcy – This option will give you the opportunity to set up a new repayment plan and oblige you to pay your creditors back over time. While no property is needed to be liquidated, the process may last for about three to five years.
If you’re looking to have a fresh start on your finances, it’s essential to understand the difference between Chapter 7 and 13 bankruptcy and stick with the right choice. That way, you’ll be able to make your financial life much better afterward.
- Filing for bankruptcy requires complete disclosure and honesty.
When it comes to bankruptcy cases, you need to be completely honest with your finances. This means that you should write down all your debts, properties, and creditors. If you’re found to be guilty of dishonesty, you may possibly face a serious federal crime that may affect your chances of getting a bankruptcy discharge.
- Filing for bankruptcy is costly.
Due to the complexity of bankruptcy laws, filing for bankruptcy may also require you to spend a significant amount of money. The amount depends on whether you need to hire a bankruptcy lawyer or not. Having an attorney on your side can be of great help to you, but it might also cost you hundreds to thousands of dollars. On the other hand, filing a bankruptcy case on your own requires you to set aside money for the filing fees. So, whichever way to go, going through the process of bankruptcy will never be cheap.
- A bankruptcy case can impact your credit standing for years.
In most cases, filing for bankruptcy can affect your ability to get credit. That’s because a bankruptcy record gives a creditor every reason to shut you out. Not only that but recovering from bankruptcy usually takes at least two years. If you’re looking to improve your credit score slowly, you need to make small amounts of credit and strictly repay them based on their terms and conditions.
- Filing for bankruptcy exposes your financial life to the public.
Whether you like it or not, the bankruptcy law may reqire you to open your finances to public scrutiny. There are instances that you need to file extensive paperwork listing down all your income, expenses, and current financial transactions. Moreover, you also have to attend the meeting of creditors as part of a bankruptcy proceeding. There, any of your creditors may question you in a public room. Even if the bankruptcy trustees strive hard to keep the proceedings as confidential as possible, the meeting will always be a public one. So, prepare yourself to expose your financial mistakes to the public.
- The bankruptcy discharge only protects you.
While the primary goal of filing for bankruptcy is the discharge, you can’t expect that the entire debt will be eliminated. That’s because a bankruptcy discharge is a personal one; thereby, it only protects you.
For example, even if you file for bankruptcy, but you’re a co-maker on a home loan, the case you’ve filed doesn’t wipe out the debt itself. The lender can still go after the other co-maker on loan.
Filing for bankruptcy will not fix everything. As much as you want a fresh start for all your finances, the entire process will never be an easy one. Apart from figuring out why you ended up in that kind of situation, it’s also important to know whether bankruptcy is the right solution for you. So, keep this information in mind to make sure you’ll not get a record of going bankrupt more than once.
So, you’re looking to find out the difference between Unsecured Loans and Secured loans, and what may be the advantages and disadvantages between the two. In todays article we’ll be discussing the simple differences between the two.
Collateral vs No Collateral
The first thing you may want to be aware of is collateral. This is the fundamental difference between the two loans; unsecured loans are loans that do not require any collateral in case you fail to meet your financial obligations, while secured loans are loans that are backed by the borrower and can end in your lender collecting possession of your property in the case you fail to meet your obligations.
The most common types of secured loans are Mortgages and Auto loans where you buy the equity off from the lender plus paying interest. Secured loans are personal loans that are widely available to help consumers make larger purchases they normally couldn’t afford otherwise.
Limits and Interest Rates
The next major difference between the two loans is the interest rates in relation to your borrowing power. You see, while you can get approved for high lines of credit via your credit card, using credit cards to pay off larger purchases is an extremely sub-optimal strategy for financially conservative reasons. In the case of using your unsecured line of credit to make bigger purchases you’ll have to pay back over a longer period of time, the interest rates of 24% or more can dig a big hole to fill even if you could purchase a vehicle or home with it.
That’s why it only makes sense that you would opt in for a secured loan that has interest rates as low as 4% depending on your credit score. Because in the time it takes to repay the loan you’ll have saved tens of thousands, to hundreds of thousands, of dollars with much better terms of repayment, all you have to do is back your purchase by collateral.
So the strategy is use Secured Loans for high and very high purchases.
Failing to Meet Your Financial Obligations
What happens when you fail to meet your financial obligations? Well each scenario is different. When it comes to failing to meet your financial obligation on an unsecured loan, typically the process heads into collections. In collections you will essentially be in negotiation with a debt collector to resolve the remaining debt on your account. It is still your obligation to pay back what you owe, and now you additionally will have a negative remark that will stay on your credit report for up to 7 years unless you look to get it removed.
When in collections, debt collectors have the right to sue you for the amount owed. In the case that judgement finds the debt collector in the right, you will then face similar consequences to a secured loan. Meaning that you may have wages garnished from you, property seized from you, including money in your bank accounts.
When it comes to secured loans, things are quickly able to move into collections should you fail to keep up with your financial obligations. But in case of any devaluation/depreciation along the way most secured loans also have you buy policies to cover the difference which results in additional fees.
Are you on the verge of bankruptcy? Not sure how to file for it or how to navigate the bankruptcy process without destroying your financial stability? The key to getting through this tricky time is hiring the best bankruptcy lawyer to help you get through this issue.
How to Find and Hire the Best Bankruptcy Lawyer
Need a bankruptcy attorney but not sure how to find the best one for you? Here are the ins-and-outs on finding and hiring the best lawyer for your case.
Start with a Broad Search
The first step in finding a bankruptcy lawyer is exploring your available options. The American Bar Association website lists lawyers and firms with attorneys who specialize in bankruptcy issues. The National Association of Consumer Bankruptcy Attorneysalso helps people legal help.
By reviewing these two websites, you can identify bankruptcy lawyers in your area and build a list of potential lawyers to contact. In addition to these two resources, ask your friends and colleagues for legal recommendations.
Contact a Few Attorneys
The next thing you should do is contact a few of the attorneys you’ve found and schedule consultations. You should note, however, that while some attorneys will meet with you for free, others will charge you for an initial consultation. When meeting with an attorney, you should ask yourself the following questions:
- Does this attorney have the bankruptcy law experience needed for my case?
- Are they worth the cost of their services?
- Am I comfortable working with this person?
During your consultation, ask them questions that challenge their expertise. Bankruptcy law can be a complicated thing, so it’s important to find a lawyer who is an expert in that area. You should also ask them how many bankruptcy cases they’ve handled. Ask about alternatives to bankruptcy they may suggest, such as credit counseling
Narrow Down Your Options
Now that you’ve met with a few different lawyers, it’s time to narrow your options down to a few choices. At this point, you should be comparing candidates, and assessing the following qualities:
- Their knowledge of bankruptcy law
- Their passion for the legal process
- Their listening and comprehension skills
Your lawyer should walk you through the potential resolutions of your case so you can make an informed decision. They should exude passion for the legal process and be able to tell you why they chose to work in bankruptcy law.
Finally, they should be able to understand your specific circumstance and show empathy toward your case.
Consider Compensation Options
Once you’ve narrowed down your list, you’ll need to ask yourself how much you’re willing to pay for the service. This will help you decide which lawyer you should hire.
It’s important to know that fees will vary based on your case and the state you live in. They’ll also differ depending on if you’re dealing with a Chapter 13 filing or a Chapter 7. Filing for a Chapter 13 bankruptcy will cost you between $1,500-$6,00 whereas filing for a Chapter 7 will cost you between $500-$3,500.
Before you hire a lawyer, ask them about their fee structure. Find out the included services that the fees cover. You should make sure you’re getting your money’s worth for your unique case.
Final Thoughts on Finding & Hiring the Best Bankruptcy Lawyer
Filing for bankruptcy can be scary, but hiring the best bankruptcy lawyer can make a scary situation less stressful. By following the easy tips and tricks in this article, you can find the best legal option for your case.
Are you looking to file for bankruptcy? Not sure how to start your legal search? Contact us to learn more about your legal options!
Celebrities like Larry King, Toni Braxton and Cyndi Lauper have all stumbled upon misfortune in the past and were forced to file for bankruptcy. An unfortunate event, bad decisions or even bad luck can happen to anyone. That’s why for decades celebrities and not so famous people like you and me, have searched and found the top bankruptcy lawyers to help with non payable debt(s).
So what is bankruptcy exactly?
Bankruptcy is a process which a judge and court trustee examine an individual’s or business’s assets and liabilities to determine whether or not they’re eligible for a discharge of their current debt(s). In most cases, once discharged, bankruptcy gives people a chance to start over and they’re no longer legally required to pay their original debt(s).
Though there are multiple bankruptcy filing options, Chapter 7 and Chapter 13 cases are the common.
If you find yourself having far more debts than money, you may want to consider this list of top bankruptcy lawyers in California.
1.Sadeghi Law(Orange County)
Sadeghi and Associates is a small firm with an experienced team ready to provide you with the best legal services. Siding with Orange County’s best lawyers and with over 20 years of practice, S&A makes it priority to keep you part of the process from start to finish.
2.Jon M. Cooper(San Diego)
Founder of San Diego Legal Pros, Jon M. Cooper has been helping provide a fresh financial start for more than 16 years. As a Cum Laude honors graduate of Thomas Jefferson School of Law attorney Cooper has a proven history of success. He has been admitted to the California State Bar as well as the Federal District Courts for the Southern District and Central District of California and is also a member of the San Diego County Bar Association.
If you’re looking for the best legal representation, in debt or struggling with other financial issues and considering bankruptcy, Jon Cooper is a dedicated and passionate bankruptcy lawyer ready to help you today!
When it comes to asking for help during a financial crisis, Sacramento bankruptcy lawyer, Pauldeep Bains has made the process easy for all of his clients. Whether you’re filing for a Chapter 7 or Chapter 13 bankruptcy he is dedicated to creating the best plan to relieve you of your financial struggle(s).
Mr. Bains has filed hundreds of bankruptcy cases throughout his career and has had exceptional results! Contact him today for an immediate evaluation and planning to get you out of the financial struggles you are facing.
4.Law Offices of W. Kirk Moore(San Jose)
- Kirk Moore wants to make sure you receive the debt relief you deserve. Providing exceptional service and affordable fees, Moore vows to make your bankruptcy filing process as stress free as possible. As the bankruptcy filing requirements have changed over the years, the Law Offices of W. Kirk Moore continue to make sure every aspect of their client’s filing is correct so that everything goes as smoothly and quickly as possible.
5.John D. Raymond(San Francisco)
John D. Raymond has helped over 20,000 people get a fresh start after filing for bankruptcy. By helping to reduce or even eliminate your debts, San Francisco bankruptcy attorney John D. Raymond can help you avoid foreclosure and keep your personal property.
To view your bankruptcy options and have your financial situation reviewed, schedule a free consultation with an attorney today!
Now is the time to free yourself of the financial burdens and stresses of life.
It’s time for a fresh start!
Whatever your current circumstance may be, put your trust in the top bankruptcy lawyers in California and start your journey to financial freedom today.
So you’ve fallen on some hard times and find yourself in a financial hole that keeps on sinking, what are you to do? It’s time to pull the chute and call for help. You’ve spent months or maybe years digging and digging, but nothing has worked. You’ve thrown every available penny at your mounting debt, to no avail. You’ve pulled extra shifts at work just to pay off compounding interest, or maybe you spent 6 months working seven days a week and only paid off just one of your four outstanding debts. You’ve been diligent using Equifax online help, but now you need extra artillery in this battle to win your life and financial freedom back. Then it’s time to bring in the big guns to assist you with a soft landing.
However, before you call a lawyer there are some extremely important points you need to take into consideration.
- The first thing you need to do is make sure any lawyer you contact about filing Bankruptcy is a specialist. Make certain that their main focus is helping people when they file Bankruptcy. You don’t want someone who doesn’t have an airtight grasp of all the current bankruptcy laws and how they should be dealt with in your situation.
- After you’ve found a lawyer who specializes in bankruptcy it’s time for you to check on them. Call your local bar association and confirm the lawyer or firms’ validity. Though it’s a simple process and won’t take much time or effort on your part, it’s very important.
- Double check that your lawyer is up to speed with any changes in the bankruptcy code for 2018. If you’ve done your diligence with selecting the right lawyer who is a trusted Bankruptcy expert then this shouldn’t be a problem, however, when dealing with such a major action like filing for Bankruptcy everything should be double and triple checked.
- With the help of your lawyer, you need to decide whether it’s better for you to file for Chapter 7 or Chapter 13 bankruptcy. This will differ on a case by case basis and it is definitely a discussion you should have with your lawyer, even if the choice seems obvious. There may be something you’re not aware of that makes one better than the other for your specific situation.
- The last thing you’ll want to check off the list before you chose a lawyer to help you file bankruptcy is to figure out how comfortable you are with them. Do you feel at ease when you call the lawyer’s office? Do you feel rushed or not? Does he or she take the time to communicate with you until all your needs or questions are answered? If you can check off all of these boxes then you’ve found the right fit and perfect lawyer for your needs.
Remember bankruptcy is a life-changing step you are taking, so don’t settle for anything less than the best.
Regardless of how much money you earn per month after your tax deductions, you become accustomed to receiving the same regular salary and manage your expenses and living standards accordingly. For example, after you receive a promotion or a pay increase you may decide to upgrade your car, to move into a bigger apartment, or make any number of other amendment to your living style. If that income is suddenly snatched away or reduced then it’s not so easy to downgrade. If you experience a garnishment of wages then you may notice a significant difference in how much take home pay you have each month. The money is no longer there, but the bills still are, and this can cause a lot of stress and financial difficulty.
What is Garnishment of Wages
Garnishment of wages occurs when you owe a particular amount of money to a creditor or a company and they have a portion of this automatically deducted from your paycheck each month. In most cases, garnishment of wages is considered as a last resort method of collecting debt. If a creditor feels as though they have exhausted all other methods of regaining funds from you, and they have tried to communicate numerous times to no avail, they may resort to garnishing your paycheck. You may not be expecting this to occur however, and may not be familiar with the processes for debt collection or the options that you have as a person with a less than perfect financial situation.
Wage garnishment can occur for virtually any financial debt – from unpaid taxes and consumer debt, to missed child support payments.
Are Businesses Allowed to Jump to Garnishing My Paycheck?
In a word: No. Garnishment of wages should only occur after a procedure (a court judgement) has taken place. With that said, there will still be instances where a decision to garnish wages is made in favor of the creditor, and where the person who is receiving the deductions from their salary does not agree with the decision. In fact, based on a report conducted by payroll processor ADP, it is estimated that over 7% of employed Americans have their wages garnished annually. That is not an insignificant amount. Though the process is complex and stressful, this article will discuss your options if you find your wages are being garnished and you either deem it as unfair and unjust, or you are struggling financially as a result. There are ways you can stop garnishment of wages.
Here’s How to Stop Your Wages From Being Garnished
Communicate with Your Creditors
This one may not necessarily help you if you are already seeing deductions from your paycheck. However if you are not quite at the wage garnishment stage yet but are concerned that it is fast approaching, heed this warning and call your creditors.
If you just ignored your debts because you cannot pay them, they will not go away and if anything, the creditor’s pursuit will just get more and more aggressive. If you are struggling, calling your creditors and let them know about your situation. They may be able to give you more time to gather funds by putting a temporary freeze on your account, or they may reduce repayments to make them more manageable.
Check the Specifics
Ensure that you are informed about your rights regarding garnishment of wages. There are rules in place, but as with many things in life, people do not always adhere to them. If is illegal for your creditors to garnish more than 25% of your paycheck. Your social security benefits and any welfare that you receive should be exempt from garnishment.
Contest it if You Believe it is Unfair
Wage garnishment is the number one cause of bankruptcy in the United States.
If you are being forced to repay more than you are able to afford or you disagree with the entire decision about garnishing your paycheck then you can file a claim through the courts. Some people feel powerless when they fall victim to wage garnishment but you should remember that you also have a say in how much money you pay out, it should not be dictated to you.
Try to Pay Off the Debt
Assess your options and finances to see if there is any way you can pay off the debt outside of the wage garnishment. If you are able to scrape the money together to pay the debt in one fell swoop then this is preferred by the creditor. Perhaps you had some money set aside that you can use or you could borrow from a relative or friend for a short period.
It is also not prohibited to contact your creditor while the garnishment is in place. Perhaps together you could come to a settlement agreement. In some cases the creditor may agree to reduce the amount of their claim somewhat in order to close off the case and reclaim as much as they are able.
File For Bankruptcy
In extreme cases where you cannot afford the garnishment at all and it is impacting your standard of living and ability to keep up other costs, you can file for bankruptcy. Bankruptcy should not be taken lightly since it is a very complex, arduous and expensive process and should only be utilized once all other avenues have been exhausted. If this really does feel like your only way out of the situation, then once your bankruptcy is granted, all garnishments of wages will be stopped immediately.