Recovering garnishment post discharge.

[samdbtto]

So I know you can recover garnished wages taken up to 90 days before filing if over $600, I claimed the whole amount with my wild card exemption when I filed so it should not go to the trustee. I want to write a letter to get the wages back from the creditor but need help. I want to prevent having to go through the court system to recover the wages, so it must be intimidating. Any suggestions or samples would help a lot.

[DesdemonaB]

Hi Sam

Do you still have your writ of garnishment paperwork? Or the release of garnishment paperwork? That would tell you where the funds went - it most likely was the law firm who either owned the debt or represented to the OC in court. I what I did was just address the letter to the law firm - I have a copy of the letter I wrote on my other laptop so I am just going by memory - stating I received the garnishment release for case no. XXX which was withdrawn by the plaintiff (insert name) on (insert withdrawal date) per item no. 4 any amounts withheld by garnishee (insert name) on or after (insert date) shall be returned to the defendant. I state a check in the amount of (insert amount owed) can be mailed to the following address bah, bah, bah. I do not receive total amount due to me by XX date you will be hearing from my lawyer.

I was lucky enough that I filed the day after the first garnishment so my funds were still at my employer (MI requires my employer to hold the funds for xx amount of days) so the funds were deposited with my paychecks. But I didn't know that so I sent the letter and law firm I was dealing with called me and explained they had not received the funds and ask my employer. I included a copy of the release with my letter - highlighting item number 4. I faxed it as well as mailed it the law firm.

Good luck

[samdbtto]

I do not have any paperwork but my employer's corporate payroll dept. will have kept any of those documents so I am sure I will be able to get my hands on them. This is a good start thank you.

Anyone else do this successfully?

[despritfreya]

Hold on a minute. . . Do you have an attorney?

Why do you think that you, as a debtor, can demand turnover of property based upon a preferential payment - assuming you filed a Chapter 7. Read 547(b). The right to recover a preference belongs to the Trustee only. . . not the debtor, unless you are in a Chapter 11 since, if you are in a Chapter 11 you serve as the Trustee.

If the creditor does not have an attorney maybe you can "con" it into returning the funds taken pre petition. My guess however, is that there is an attorney who is going to ask you to cite authority that allows you to step into the Trustee's shoes.

Des.

[despritfreya]

I was lucky enough that I filed the day after the first garnishment so my funds were still at my employer

And that is why you got the money back. You still had "strings" attached since the funds had not been sent to the creditor. Had the funds been sent after you filed and kept by the creditor such would have been a violation of 362. This is not the same as attempting to recover funds that came into the possession of a creditor before the bk was filed.

Des.

[justbroke]

So I know you can recover garnished wages taken up to 90 days before filing if over $600,

Only a Trustee can use the powers in 11 USC 547 to recover a "preference". That recovery is for the benefit of the priority and/or unsecured creditors; not for the benefit of the debtor.

Except in limited circumstances, such as the garnished or levied funds are still being held by the institution/employer honoring the writ, I have never read about any recovery of the funds to the benefit of the debtor.

(Edited to add... Des has said this better than I did.)

[samdbtto]

Found this, what do you all think

11 U.S.C. 522(h) The debtor may avoid a transfer of property of the debtor or recover a setoff to the extent that the debtor could have exempted such property under subsection (g)(1) of this section if the trustee had avoided such transfer, if--

(1) such transfer is avoidable by the trustee under section 544, 545, 547, 548, 549, or 724(a) of this title or recoverable by the trustee under section 553 of this title; and

(2) the trustee does not attempt to avoid such transfer.

(i)

(1) If the debtor avoids a transfer or recovers a setoff under subsection (f) or (h) of this section, the debtor may recover in the manner prescribed by, and subject to the limitations of, section 550 of this title, the same as if the trustee had avoided such transfer, and may exempt any property so recovered under subsection (b) of this section.

(2) Notwithstanding section 551 of this title, a transfer avoided under section 544, 545, 547, 548, 549, or 724(a) of this title, under subsection (f) or (h) of this section, or property recovered under section 553 of this title, may be preserved for the benefit of the debtor to the extent that the debtor may exempt such property under subsection (g) of this section or paragraph (1) of this subsection.

[samdbtto]

This was the quote from lawyer I found

"I have been successful in recovering wages garnished within the 90 days before the bankruptcy was filed in bankruptcy cases where my client was able to exempt the funds and the trustee was not interested in collecting them. What I do in cases involving wages garnished within the 90 days before bankruptcy is we list the garnished wages as an asset on Schedule B and exempt them on Schedule C (assuming we have available exemptions). I then will send a letter to the trustee asking if they will be administering the estate and if they have any objection to the Debtor's counsel (me) recovering those wages on behalf of the Debtor. I have not had a Trustee say no, but it depends on your situation and the Trustee. Certainly the smaller the amount of garnished wages, the less likely the Trustee will be interested. Once I have the trustee's go-ahead, I send the creditor a demand letter - telling them that per Title 11, USC Sections 522(h) and 547, they must return the wages to the Debtor. So far I have not failed to get the wages back. As I said, this is a case by case situation; the facts of my clients' cases may be vastly different that yours. Also, not all creditors are so cooperative, and in some cases it may be necessary to recover the wages by filing a motion with the court and getting an order from the judge. "

[justbroke]

Please read what you just posted. It's all about the Trustee. Even the attorney is careful to mention that they work with the Trustee and, in most cases, the Trustee is okay with the debtor keeping the money under an exemption if the amount isn't that great.

Again, the key is in 11 USC 522(h)(2) where "the trustee does not attempt to avoid such transfer". I personally haven't seen this done, but bravo for the attorney you spoke with. It seems like a very narrow area. I will say that I actually have done things using the power of the Trustee to recover money that was offset. I did need to make sure it was exempted; it was already listed as an asset on Schedule B of my petition. I then had to modify my petition to include an exemption on Schedule C.

Do you have the exemptions, and do you have Trustee permission?

(Like the attorney said... most creditors will just return the money based on a demand letter. However, since you're not an attorney, that letter needs to be very professional and include actionable references to the sections of the bankruptcy code that allow you to recover it. They may just ignore you and you would need to file a motion in the court. There's something about letters coming from attorneys that seems to motivate other attorneys/creditors.)

[despritfreya]

sambdtto,

The attorney's approach, in my opinion, is a bluff and if the creditor or the creditor’s attorney does not know his/her way around the Code probably works.

Under 522(h), you, as the debtor, can only recover the 547 preference if such was recoverable in conjunction with one of the enumerated sections referenced in (g). Those subsections require one of the following:

1. Bk estate is entitled to equitable subordination. (510(c)(2))

or

2. The recovered asset IS property of the estate. Once all strings are cut (creditor has possession of the garnished funds) the asset is not property of the estate under 541's definition. In addition, the asset must be of consequential value to the estate. Your wages are not of any value to the estate since you plan on keeping them. This provision is why a debtor can file a turnover action in a reorganization bk to recover a vehicle as the vehicle is valuable to the estate since, without it, the debtor can’t get to work and thus fund the Plan.(542)

or

3. The one controlling the asset is in a custodial position (employer has control of $ but has not released it yet.) (543)

or

4. Transfer has already been avoided by the Trustee but not yet turned over. (550)

or

5. The asset belongs to the estate and needs to be preserved. (551)

or

6. Creditor is not entitled to a setoff as allowed. (553)

None of the above applies in a situation where the wages were garnished pre petition. Therefore, if I was the creditor's counsel I would tell the debtor to go pound sand. But, it is a good bluff and since most collection lawyers do not have half a brain (did I say that) go for it.

Des.

[samdbtto]

I stated the garnishment in schedule b and claimed it in schedule c, if that is what you are asking justbroke, i used my wild card exemption to claim the full amount. The trustee did not try to claim it and made no mention of it.

I was going to reference the codes and threaten with a adversary proceeding by my attorney, in the letter.

[justbroke]

None of the above applies in a situation where the wages were garnished pre petition. Therefore, if I was the creditor's counsel I would tell the debtor to go pound sand. But, it is a good bluff and since most collection lawyers do not have half a brain (did I say that) go for it.

I agree that you may be able to coerce a creditor attorney into returning the money.

I was going to reference the codes and threaten with a adversary proceeding by my attorney, in the letter.

If the creditor attorney is half-way knowledgeable on bankruptcy law, they will call your bluff. Remember, that you will need to pay $260 to re-open your case unless you can show that this is a dischargeability issue (or violation issue). I'm finding that it's not that easy to re-open a bankruptcy case! A judge may deny the Motion to Re-Open right at the first hearing on the matter.

How much of a garnishment are we talking anyhow?

[samdbtto]

2200

[justbroke]

Well, all I can say is what Des and I have basically stated. You can try the letter campaign and see if the creditor will give it back. However, you should actually seek Trustee approval to recover the money and that the Trustee doesn't want it as an avoided preference action. The Trustee could make $550 as his/her fees for administering $2,200 (25% of first $5,000 under fee rules).

It would be interesting to me that the Trustee doesn't think much of the amount, but to start a preference action, you must still make sure the Trustee isn't interested in it. That's along the lines that your attorney-asked answer provided. You bringing it up to the Trustee, may peek the Trustee's curiosity.

How did you exempt it anyhow? I mean, under what statutory authority (statute)? In Illinois the total Wildcard is $2,000 and it includes wages (the up to 85% of unpaid wages). I'm wondering because you wrote that you exempted the "whole amount" under the Wildcard, yet the amount is more than the Wildcard ($2,200 versus $2,000 respectively). So this means that you have no furniture, electronics, appliances or anything else like that to exempt.

[Freddy03]

With my case I was only able to recover wages garnished after I filed. The wages that were garnished 90 days prior was exempted but I was not able to get them back. I'm sorry I forgot the terms my attorney told me.