Wage Garnishment / Tax Refund Intercept

[jai]

Hello all. My search for bankruptcy information has brought me here, and I must say, the information I have found so far has been extremely helpful!

I am hoping to file Chapter 7 within the next month or so. Right now I am saving up for my attorney fees. I wanted to attempt it Pro Se, but I don't have enough confidence for that. To me, my case seems simple, but still.

Right now I have defaulted on my student loans. One of the loan holders has a wage garnishment against me. I also have another wage garnishment for automobile repairs. Another one of my student loan holders is trying to get a garnishment, but I am already at the 25% max. That is the reason I need to save for the attorney.

My question is: Will the automatic stay protect me from having my tax refund intercepted?

Assuming that everything goes smoothly with my filing, I hope to be able to rehabilitate my student loans to their original state and pay them as required.

My apologies if this has already been covered, I used the search feature but was unable to locate information pertaining to my situation.

Thank you!

-Jai

[HHM]

That is a bit of a tricky question. Generally, yes, the filing of the case, should protect you from a tax refund intercept, but it may be a moot point. However, it appears Maryland has a wild card exemption that allows you to protect cash of any kind so the refund is not at risk of being taken by the trustee so long as the refund is properly exempted.

But, if these are federal student loans (which they must be if they are contemplating tax refund intercept) there is an argument that it is a debt to the government (depending on which agency is handling the account at this point) and therefore a tax refund intercept is merely them exercising their right of "set off" which may be allowed notwithstanding the bankruptcy.

[jai]

Thank you, that is what I was fearing. Hopefully I will be able to get on payment plans with all of them prior to filing.

That is a bit of a tricky question. Generally, yes, the filing of the case, should protect you from a tax refund intercept, but it may be a moot point. However, it appears Maryland has a wild card exemption that allows you to protect cash of any kind.

But, if these are federal student loans (which they must be if they are contemplating tax refund intercept) there is an argument that it is a debt to the government (depending on which agency is handling the account at this point) and therefore a tax refund intercept is merely them exercising their right of "set off" which may be allowed notwithstanding the bankruptcy.

[nceguyfromne]

Amazing how one can't get a credit card until they're 21 anymore but could conceivably be graduated from college by then and owe upwards of $57K (undergrad Stafford loan max.) to the government, which they'll follow you to the ends of the Earth to collect! I feel for you. Hope it all works out!

[jai]

Thank you...prayerfully it will work out just fine. If it's intercepted now, it's just less left that I have to pay. See, there's a positive to every negative! (But I still would rather it not be taken!)

Amazing how one can't get a credit card until they're 21 anymore but could conceivably be graduated from college by then and owe upwards of $57K (undergrad Stafford loan max.) to the government, which they'll follow you to the ends of the Earth to collect! I feel for you. Hope it all works out!

[jai]

Well I was able to get one garnishment stopped by beginning their rehabilitation program. Not sure if that was the smartest thing since I will be filing before they are rehabilitated. That payment is a lot smaller than the garnishment was.

Upon further research, it seems that after you file, all your student loans go into automatic forbearance. I am thinking that will prevent an income tax refund interception. Hopefully I will be able to exempt that amount.

Prayerfully I will be able to rehabilitate the defaulted loans after the BK, and get them on an IBR plan. THAT would be amazing.