Should I file for bankruptcy if my creditors are garnishing my wages? 30 Answers as of June 09, 2013

A creditor 1099ed me and wrote off a debt and I paid taxes on it and then sold the account to a collection agency. They just levied my account and now are garnishing my wages. The amount I owe is double the original amount, plus I paid $4000 into it. I want to file bankruptcy. Is it a good idea? I don't want them to have another dime from me!

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Financial Relief Law Center
Financial Relief Law Center | Mark Alonso
Yes, having your wages garnished is a reason why someone would file bankruptcy, because once you file bankruptcy all collections activity stops, which includes wage garnishment. Filing bankruptcy ch. 7 (if you can qualify for it) would not allow the creditor to obtain any more from you and therefore the balance would be discharged or wiped out in the bankruptcy giving you a fresh start. I don't know your entire situation, how much other debt you have or what your income or assets are like, but filing over one credit may not make sense for you, unless the amount owed is truly substantial compared to your income and overall financial situation. Nevertheless, if your wages are being garnished now at this point, you certainly need relief. I would definitely consider filing, start adding up the rest of my debts, and evaluate my income to see if I can qualify for a ch. 7. I would recommend speaking with an attorney prior to filing to have your situation evaluated first.
Answer Applies to: California
Replied: 8/22/2011
Mercado & Hartung, PLLC
Mercado & Hartung, PLLC | Christopher J. Mercado
Yes, filing Bankruptcy will stay the garnishment.
Answer Applies to: Washington
Replied: 8/22/2011
Eric J. Benzer, Attorney at Law
Eric J. Benzer, Attorney at Law | Eric Benzer
Yes.
Answer Applies to: Maryland
Replied: 6/9/2013
Bird & VanDyke, Inc.
Bird & VanDyke, Inc. | David VanDyke
What you are saying doesn't really make much sense. You say you compromised the debt and received a 1099 on that debt and they are now garnishing your wages??? Do you have a letter from them or other documentation that indicates this debt was settled? Are you sure it was this debt and not something else that you settled. If you have documentation the debt was settled I would contact the attorney that garnished your wages and provide him or her with it. If they continue to garnish your wages then contact a lawyer. If you are mistaken about settling the debt then yes bankruptcy would solve the issue.
Answer Applies to: California
Replied: 8/21/2011
Law Office of Andrew Harris
Law Office of Andrew Harris | Andrew Harris
Filing bankruptcy will immediately stop the garnishment. If you have enough other debt, it may well be worth it for you to file bankruptcy.
Answer Applies to: Oregon
Replied: 8/21/2011
    Dan Wilson Bankruptcy
    Dan Wilson Bankruptcy | Dan Wilson
    Yes.
    Answer Applies to: Colorado
    Replied: 6/9/2013
    Paul Stuber, Attorney at Law
    Paul Stuber, Attorney at Law | Paul Stuber
    If you file now it will stop the garnishment right away. You should check if you qualify to file and if it is in your best interest now to file for other reasons. You should also check your accounting for tax reasons if you pay the debt that was listed as income in a 1099.
    Answer Applies to: Colorado
    Replied: 8/21/2011
    Law Office of John C. Farrell, Jr.
    Law Office of John C. Farrell, Jr. | John C. Farrell, Jr.
    The IRC tax code allows for a 1099 to be issued under its debt forgivness provision. This typically happens after a debt is settled for less than what is owed. However, I have seen crediors issue 1099-C without a settlement when they write it off as bad debt. You still may be liable for the money owed to certain amount but you certainly do not have to pay the taxes on it again. You should dispute the debt's validity with the agency and worse case scenario settle the account for pennies on the dollar.
    Answer Applies to: Massachusetts
    Replied: 8/20/2011
    Lewis Adams and Associates
    Lewis Adams and Associates | Lewis P. Adams
    A bankruptcy will certainly stop the garnishment and the personal collection of the account, but it comes with certain negative aspects regarding your credit.
    Answer Applies to: Utah
    Replied: 8/20/2011
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    Bankruptcy might be a good option for you. Consult with a lawyer. Give him or her all the details. That is the only way you will get good advice.
    Answer Applies to: California
    Replied: 8/20/2011
    Ross Smith, Attorney at Law
    Ross Smith, Attorney at Law | Charles Ross Smith III
    Holy Cats! Yes. Get thee to a lawyer. They can stop this garnishment and maybe even recover some of your money. Good luck.
    Answer Applies to: Ohio
    Replied: 8/20/2011
    CONSUMER PROTECTION ASSISTANCE COALITION, INC. (DE).
    CONSUMER PROTECTION ASSISTANCE COALITION, INC. (DE). | Gary Lee Lane
    Yes.
    Answer Applies to: California
    Replied: 6/9/2013
    Law Office of Maureen O' Malley
    Law Office of Maureen O' Malley | Maureen O'Malley
    Yes, this is the perfect time. Just file before the return date and you can recover what they've recently taken.
    Answer Applies to: Virginia
    Replied: 8/19/2011
    Ashman Law Office
    Ashman Law Office | Glen Edward Ashman
    We'd have to see the numbers but a bankruptcy might be a good option. Part of what a good attorney may be able to do for you may include getting your taxes amended over that 1099 if you do file.
    Answer Applies to: Georgia
    Replied: 8/19/2011
    Melinda Murphy Dionne, PC
    Melinda Murphy Dionne, PC | Melinda Murphy Dionne
    The fact that the creditor wrote off the debt does not prevent them from selling the unpaid debt to a collection agency. Do you have other debt problems besides this current garnishment? I certainly would speak to a bankruptcy attorney regarding my rights and how to protect myself. You can stop the garnishment with the filing of a bankruptcy case. If you file quickly, you may even be able to get the money back that has been taken out of your check.
    Answer Applies to: Alabama
    Replied: 8/19/2011
    Bankruptcy Law office of Bill Rubendall
    Bankruptcy Law office of Bill Rubendall | William M. Rubendall
    If your wages are being garnished you can file a bankruptcy. Consult an attorney to discuss both chapter 7 and chapter 13.
    Answer Applies to: California
    Replied: 8/19/2011
    Goldsmith & Guymon
    Goldsmith & Guymon | Marjorie Guymon
    Filing bankruptcy would stop the garnishment. However, you need to determine whether you are eligible for a Chapter 7, and whether there are assets available for liquidation that would go to pay the creditor, or if you are required to file a Chapter 13 that would require payments to the creditor. I recommend seeking legal advise for this determination.
    Answer Applies to: Nevada
    Replied: 8/19/2011
    Charles Schneider, P.C.
    Charles Schneider, P.C. | Charles J. Schneider
    Yes, it will be ordered by the court to immediately stop the garnishment.
    Answer Applies to: Michigan
    Replied: 8/19/2011
    Carballo Law Offices
    Carballo Law Offices | Tony E. Carballo
    Bankruptcy is an option you should consider but there is a lot more information that a lawyer would need to advise you as to the best option for you. Therefore, go see a bankruptcy lawyer for a consultation and take information about your income, value of property and what you owe.
    Answer Applies to: California
    Replied: 8/19/2011
    Grasso Law Group
    Grasso Law Group | Charles Grasso, Esq.
    You have to look at the big picture (all your debt / assets and circumstances) when determining whether or not bankruptcy is right for you. Filing for bankruptcy can stop the wage garnishments and give your some breathing room. You should consult with a bankruptcy attorney to better understand your options.
    Answer Applies to: California
    Replied: 8/19/2011
    Theodore N. Stapleton, PC
    Theodore N. Stapleton, PC | Theodore N. Stapleton
    Yes if you qualify you can file chapter 7 and discharge the debt.
    Answer Applies to: Georgia
    Replied: 8/19/2011
    Heupel Law
    Heupel Law | Kevin Heupel
    Yes. Filing bankruptcy will discharge the debt and eliminate the 1099 so you won't pay tax on the debt.
    Answer Applies to: Colorado
    Replied: 8/19/2011
    Law Offices of Joseph A. Mannis
    Law Offices of Joseph A. Mannis | Todd Mannis
    Well, considering your wages are already being garnished, stopping that will require one of two things. One would be to pay them, or negotiate a settlement, etc. The other is filing a bankruptcy. In the overall scheme of things, $4,000 is not that much, and I myself would try to avoid filing bankruptcy for that small amount if possible. However, if there are other debts besides this, perhaps bankruptcy is a good option for you.
    Answer Applies to: California
    Replied: 8/19/2011
    Law Office of L. Paul Zahn
    Law Office of L. Paul Zahn | Paul Zahn
    A bankruptcy filing will immediately stop the garnishment. It might be a good idea if you have other dischargeable debt and you qualify for a bankruptcy filing.
    Answer Applies to: California
    Replied: 8/19/2011
    Braunstein Law, PC
    Braunstein Law, PC | Jacob Braunstein
    Filing for bankruptcy will stop garnishment of your pay check. When you file bankruptcy, an "automatic stay" goes into effect. What that means is all attempts by creditors to collect on a debt stop at least temporarily.
    Answer Applies to: Oregon
    Replied: 8/19/2011
    The Larkin Law Firm
    The Larkin Law Firm | Jeffrey Larkin
    The creditor is in violation of the law and can be sued if they 1099'd you and then sold off the account for further collection after the fact. Once they elect to issue a 1099 (assuming it is a 1099-C), the debt is canceled and cannot further be collected on. If you would like me to review your case (or if you have other debts and want to consider bankruptcy options in addition to a possible claim against the creditor) please let me know. I take these violation cases on a contingency basis and there are no out of pocket fees.
    Answer Applies to: California
    Replied: 8/19/2011
    The Law Offices of Kristy Qiu
    The Law Offices of Kristy Qiu | Mengjun Qiu
    Yes, if you file for bankruptcy all judicial proceedings have to stop against you, as well as garnishments. After filing for bankruptcy, you have to submit the suggestion of bankruptcy to the appropriate state court where the garnishment and etc. judicial proceedings are pending and you have to notify parties involved, i.e. the creditors and their attorneys. Whatever they have already garnished, if it's been over $600 in the past 90 days, they will have to disgorge that amount to the trustee. The trustee won't give that money back to you, instead he/she will distribute that amount pro-rata to all your unsecured creditors. If you're on a personal vendetta against the creditor who started garnishing you, bankruptcy might get them back pretty well.
    Answer Applies to: Florida
    Replied: 8/19/2011
    Law Office of Michael Johnson
    Law Office of Michael Johnson | Michael Johnson
    Yes. The day you file a bankruptcy they will not be able to take any other money from you.
    Answer Applies to: Florida
    Replied: 8/19/2011
    Judith A. Runyon, Esq. Attorney at Law
    Judith A. Runyon, Esq. Attorney at Law | Judith A. Runyon
    Yes, if you wualify.
    Answer Applies to: California
    Replied: 6/9/2013
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