Will filing for bankruptcy keep the bank from garnishing my wages? 29 Answers as of January 21, 2013

If we have an unsecured loan for $150,000, which cannot be paid, and the bank will not settle, but instead sues us in court and wins, can they garnish wages from our paycheck and/or touch our 401K? Secondly, if they win, will filing bankruptcy save us from paying this debt? Thank you!

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Mercado & Hartung, PLLC
Mercado & Hartung, PLLC | Christopher J. Mercado
the BK will stop the garnishment. If it's unsecured, it will likely be discharged. Your 401K is probably exempt
Answer Applies to: Washington
Replied: 8/11/2011
Heupel Law
Heupel Law | Kevin Heupel
Yes, bankruptcy puts a “stay” in place that prevents creditors from garnishing your bank accounts and wages.
Answer Applies to: Colorado
Replied: 8/9/2011
Eric J. Benzer, Attorney at Law
Eric J. Benzer, Attorney at Law | Eric Benzer
Yes
Answer Applies to: Maryland
Replied: 8/6/2011
Lehn Law, PA
Lehn Law, PA | Joseph W. Lehn
Once a person files for bankruptcy protection all garnishments must stop as required by the automatic stay. 401K's are a protected asset in bankruptcy.
Answer Applies to: Florida
Replied: 8/5/2011
Bird & VanDyke, Inc.
Bird & VanDyke, Inc. | David VanDyke
Bankruptcy will discharge the debt completely. Yes they can garnish wages, levy on bank accounts etc. They cannot levy on any qualified retirements.
Answer Applies to: California
Replied: 8/3/2011
    Theodore N. Stapleton, PC
    Theodore N. Stapleton, PC | Theodore N. Stapleton
    Yes a bankruptcy filing will stay any garnishments or other collection actions and yes you can probably discharge the debt in a chapter 7. I am happy to discuss your options with you. Please call to schedule a free consultation.
    Answer Applies to: Georgia
    Replied: 8/2/2011
    Ray Fisher Law Offices
    Ray Fisher Law Offices | Ray Fisher
    Question: Will filing for bankruptcy keep the bank from garnishing my wages? Yes and so will Texas law if you do not file Question Detail: If we have an unsecured loan for $150,000, which cannot be paid, and the bank will not settle, but instead sues us in court and wins, can they garnish wages from our paycheck and/or touch our 401K? Not in Texas. Secondly, if they win, will filing bankruptcy save us from paying this debt? Yes Telephone:
    Answer Applies to: Texas
    Replied: 8/2/2011
    Breckenridge and Walton
    Breckenridge and Walton | Alan D. Walton
    Generally yes. Garnishment can only happen with a judgment. Your pay can be garnished up to 25%. The 401(k) is 100% protected. Assuming fraud was not involved in the debt, bankruptcy would eliminate it so further collection could not occur.
    Answer Applies to: Michigan
    Replied: 8/2/2011
    Indianapolis Bankruptcy Law Office of Eric C. Lewis
    Indianapolis Bankruptcy Law Office of Eric C. Lewis | Eric Lewis
    In many states, a debt reduced to judgment can result in wage garnishment. Bankruptcy stops wage garnishments.
    Answer Applies to: Indiana
    Replied: 8/2/2011
    Bankruptcy Law office of Bill Rubendall
    Bankruptcy Law office of Bill Rubendall | William M. Rubendall
    When bankruptcy is filed it creates an automatic stay against garnishment. Also, exemptions can be claimed in bankruptcy, which includes 401 assets.
    Answer Applies to: California
    Replied: 8/2/2011
    Glen A. Kurtis, P.C.
    Glen A. Kurtis, P.C. | Glen A. Kurtis
    Yes once the case is filed all collection efforts must stop. The garnishment would come after the filing. P
    Answer Applies to: New York
    Replied: 8/2/2011
    Law Office of Harry L Styron
    Law Office of Harry L Styron | Harry L Styron
    If you file bankruptcy, all unsecured debt is discharged. You can wait until they have a judgment, or file before they ever file suit. You should, however, consult bankruptcy counsel to determine if you have non-exempt assets which a bankruptcy trustee would take to satisfy your debts. I note that a 401K is exempt from execution to satisfy a judgment and exempt in a bankruptcy.
    Answer Applies to: California
    Replied: 8/2/2011
    Ashman Law Office
    Ashman Law Office | Glen Edward Ashman
    Bankruptcy will usually protect you from garnishment. In most cases you can also protect your 401K using a bankruptcy. Doing it right, and in a timely fashion, is vital. To see if you qualify, and to make sure you protect your assets if you do, see a lawyer before they get a judgment.
    Answer Applies to: Georgia
    Replied: 8/2/2011
    The Schreiber Law Firm
    The Schreiber Law Firm | Jeffrey D. Schreiber
    Unless the loan was obtained by fraud or giving the bank a financial statement which contained false statements, the debt can be discharged.
    Answer Applies to: California
    Replied: 8/2/2011
    Law Office of J. Thomas Black, P.C.
    Law Office of J. Thomas Black, P.C. | J. Thomas Black
    Here in Texas, a judgment creditor with a Texas judgment cannot garnish wages for a general unsecured debt. However, once you put your wages in the bank, the judgment creditor can garnish your bank account, as wages lose their exempt character once deposited. And no, they cannot execute upon or seize a 401(k) plan. If it's an unsecured loan, and the creditor is not alleging fraud or anything, then yes, if you qualify to file bankruptcy, it would relieve you of this debt, and all your other dischargeable debts. You should consult with an experienced bankruptcy attorney to help you get through the process. Thank you,
    Answer Applies to: Texas
    Replied: 8/2/2011
    Law Offices of Sheryl S. Graf
    Law Offices of Sheryl S. Graf | Sheryl S. Graf
    Once your bankruptcy case is filed, all collection activity, including any pending lawsuit where your bank is seeking money from you, any wage garnishment, any action to seize property, and any other action to collect a debt are automatically stayed (with some limited exceptions which may or may not apply depending on the facts of your particular case). Typically, the fees to file for bankruptcy are less than the fees to defend against a lawsuit. For this reason, if a bankruptcy filing is inevitable, most debtors file at the beginning of a pending lawsuit instead of after a judgment is entered against them. The first step should be to meet with a qualified attorney who helps people file for relief under the bankruptcy code. An experienced attorney should provide the following services at the initial consultation at no charge: A description of the relief available, the benefits and the risks of filing for bankruptcy under Chapters 7, 11, 12, and 13 of the Bankruptcy Code. An analysis, based on the information and documents provided by you of your income, expenses, assets, and liabilities. If it appears from this analysis that bankruptcy may be an appropriate remedy for you, there should be a discussion of the information and documents needed, as well as a procedural timetable. If it appears that bankruptcy may not be an appropriate remedy for you, there should be a discussion of other possible alternatives. The information presented here is general in nature and should not be construed to be formal legal advice, nor the formation of a lawyer/client relationship.
    Answer Applies to: California
    Replied: 8/2/2011
    R. Steven Chambers PLLC | R. Steven Chambers PLLC
    Yes, they can sue and if they win, garnish wages. Proceeds in a 401k are exempt from creditors' claims except for contributions made within the year prior to attachment. In bankruptcy the debt would be discharged.
    Answer Applies to: Utah
    Replied: 1/21/2013
    Law Office of John C. Farrell, Jr.
    Law Office of John C. Farrell, Jr. | John C. Farrell, Jr.
    Way back when you signed the loan agreement the lender agreed to finance you and you agreed to pay the loan back pursuant to the terms of the agreement. Therefore, non-payment of the loan (even if it were for $1.00) is called a breach of contract and the lender has a right to seek repayment of the loan. Typically, the initial efforts remain in-house with phone calls and letters asking for payment. Then if that doesn't work it can be sent out to collections and perhaps to an attorney to file a lawsuit. If a lawsuit is filed you, as defendant, are afforded the right to defend the suit with any defenses provided under law as well as filing a counterclaim(s) if one exist. Nonetheless, a creditor has several means of enforcement of a lawsuit such as a lien on your real estate, levy of your bank account, levy of your personal property and wage garnishment. In Massachusetts, wage garnishment does not occur until after the creditor has obtained a judgment against you and the amount they can take is governed by law. With respect to your 401K that is protected under law and if you do end up filing bankruptcy it is not included and cannot be touched. However, bear in mind if you cash out your 401K or even roll it over into a traditional IRA then the protection you had no longer exists. On another note, without knowing any of your facts or details, it seems to me that such a large unsecured loan may perhaps be a personal guaranty for a business. If that is the case then the person on the business can file BK but the personal guarantor is still liable. With respect to the bankruptcy saving you, it will depend greatly on which form of bankruptcy you file, assuming you qualify.
    Answer Applies to: Massachusetts
    Replied: 8/2/2011
    Grasso Law Group
    Grasso Law Group | Charles Grasso, Esq.
    If you lose your lawsuit and the bank obtains a judgment against you, then they can seek to have your wages garnished. If you file for bankruptcy you can seek to have the debt or judgment discharged if you so qualify.
    Answer Applies to: California
    Replied: 8/1/2011
    Bankruptcy Law Center
    Bankruptcy Law Center | Bill Zurinskas
    Applies to Bankruptcy filed in Colorado and using Colorado exemptions only: Unsecured debt is generally discharged in bankruptcy no matter how large or small the debt is, but not all unsecured debt is dischargeable. Debts incured through fraud or criminal conduct may be found nondischargeable. Debts incurrred to pay taxes may be non-dischargeable There are more exceptions to the general rule. 401k's are generally exempt under Colorado exemption laws.
    Answer Applies to: Colorado
    Replied: 8/2/2011
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    If they sue you they can garnish wages. They can't touch 401k funds. Bankruptcy will stop them from garnishing and relieve you from paying your debts.
    Answer Applies to: California
    Replied: 8/1/2011
    Judith A. Runyon, Esq. Attorney at Law
    Judith A. Runyon, Esq. Attorney at Law | Judith A. Runyon
    They can garnish your wages from your bank accounts, but not your 401(K). Bankruptcy stops the garnishment and bank account collection.
    Answer Applies to: California
    Replied: 8/1/2011
    Law Office of Lynnmarie A. Johnson
    Law Office of Lynnmarie A. Johnson | Lynnmarie Johnson
    They can garnish your wages if they get the judgment, generally they cannot get to your 401(k). Bankruptcy on an unsecured loan would definitely stop them from garnishing you or even getting a judgment against you.
    Answer Applies to: Michigan
    Replied: 8/1/2011
    Law Office of Maureen O' Malley
    Law Office of Maureen O' Malley | Maureen O'Malley
    Yes, filing for bankruptcy will keep a suit from commencing and no garnishment can be placed. If it's already happened, you can file bankruptcy before the Return Date on the Summons and get the money recovered. They could take it from your 401. Have a lawyer do this for you, to save errors and money.
    Answer Applies to: Virginia
    Replied: 8/1/2011
    Law Offices of Joseph A. Mannis
    Law Offices of Joseph A. Mannis | Todd Mannis
    OK, its unsecured, according to your question. Yes, they can garnish your wages if they get a judgment. The 401K would be exempt, and yes, bankruptcy would wipe out this debt assuming it is unsecured, and assuming there were no other issues such as fraud, etc.
    Answer Applies to: California
    Replied: 8/1/2011
    Law Office of Xochitl Anita Quezada
    Law Office of Xochitl Anita Quezada | Xochitl Anita Quezada
    They can garnish your wages. Filing for bankruptcy before judgment is entered will prevent them from garnishing your wages.
    Answer Applies to: California
    Replied: 8/1/2011
    Colorado Legal Solutions
    Colorado Legal Solutions | Stephen Harkess
    Your 401k is safe from garnishment as long as you leave the money in it. Your wages can be garnished if the bank gets a judgment against you. A bankruptcy filing will prevent that from happening.
    Answer Applies to: Colorado
    Replied: 8/1/2011
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