Many people in California rely on their disability benefits, either Social Security Disability Insurance (SSDI) benefits or Supplementary Security Income (SSI). This monthly income is required to pay rent, food, utilities, and other necessities. While creditors in California could garnish your regular wages, they are generally prohibited from garnishing your disability benefits. However, your benefits are subject to garnishment for certain liabilities. Below, our Roseville bankruptcy attorney from The Bankruptcy Group discusses garnishments and disability benefits in more detail.
Wage Garnishment in California
If you default on a contract or are behind on your payments, a creditor is entitled to file a lawsuit. If the court enters a judgment against you, your creditor could petition the court for an order garnishing your wages. When entered, a certain amount of money would be withheld from your paycheck and sent directly to the judgment creditor.
In nearly every case, a creditor must file a lawsuit before obtaining a wage garnishment order. For instance, if you owe an outstanding medical bill for emergency room services, a wage garnishment cannot be attached with a formal lawsuit.
There are exceptions to the judgment requirement. If you owe unpaid income taxes, court-ordered child support payments, or are behind on student loans, you could have your wages garnished without a court order. Our Sacramento bankruptcy attorney has options that you could use to stop wage garnishments.
Disability Garnishments in California
If your income is from SSDI or SSI, a creditor is typically not entitled to obtain a garnishment against your benefits. However, there are notable exceptions to this rule and some ways an ordinary creditor could get to your benefits.
One of the methods a judgment creditor has available is freezing your bank account. A creditor will obtain a judgment against your account. Your bank will then prohibit access to your money, turning it over to your creditor unless you have an available exemption. Disability payments are exempt, but it is not absolute.
You can protect two months of disability income. Therefore, if you have $6,000 in your bank account, and your regular disability benefit is $1,500 a month, a creditor will be able to take $3,000 from your frozen account.
Furthermore, your disability benefits could be garnished for debts that do not require court-ordered judgments, such as unpaid income tax, child support arrears, and student loans that are in default. The federal government could garnish a significant percentage of your disposable income based on your dependents if you owe unpaid income taxes. Furthermore, California could take up to 25% of your net income for overdue state taxes. Additionally, the Department of Education is entitled to 15% of your disposable income. If you are behind on child support payments and are not supporting another child or spouse, 60% of your disability could be garnished. If your disability benefits have been garnished, contact our California bankruptcy lawyer.
Bankruptcy and Disability Garnishments
Having your disability garnished or your bank account emptied could be devastating if you are just making ends meet. When your income is already limited, losing a small portion could make it impossible to pay your regular bills.
One way people can stop any type of garnishment is by filing for bankruptcy. When our California bankruptcy attorney files your bankruptcy, an injunction called an “automatic stay” goes into immediate effect that prohibits all creditors, including government agencies, from taking any action to collect a debt. While this stay eliminates phone calls and letters, it also stops any legal proceedings – including wage or disability garnishments. Filing for bankruptcy will also free a frozen bank account, allowing you access to your funds and preventing the bank from turning the money over to your creditors.
Chapter 7 Bankruptcy
However, depending on what chapter of bankruptcy you filed, the relief could be only temporary. Chapter 7 is the most popular type of bankruptcy in California, allowing a petitioner to discharge most of their debt in about four or five months. If a judgment creditor has access to your bank account, our California bankruptcy attorney might advise that Chapter 7 is your best option. Unfortunately, most of the debt that results in the garnishment of disability benefits is also categorized as “non-dischargeable.” This categorization means that the debt will survive bankruptcy. Therefore, once you receive a discharge, or if a creditor files for relief of the imposed stay, your disability will once again be subject to garnishment.
Chapter 13 Bankruptcy
People with a wage or disability garnishment are also entitled to file for Chapter 13 bankruptcy. Unlike Chapter 7, a petitioner in Chapter 13 will have to pay a portion or all their debt through a bankruptcy plan. Depending on your circumstances, the bankruptcy will last three to five years.
While it might not seem beneficial at first, filing for Chapter 13 could offer an easier way to pay down the debts that are currently being garnished. For example, consider unpaid federal income taxes. Chapter 13 will give you five years to pay your outstanding taxes. This time frame might be substantially longer than paying through a garnishment, lowering your monthly payment. Additionally, most tax claims will break the amount you owe down to a priority amount and a non-priority unsecured amount. Often, the unsecured portion is penalties and interest. Therefore, by filing for bankruptcy, you could reduce the total amount you are required to pay.
Additionally, if you can discharge other problematic debt, such as credit card bills or unsecured personal loans, you could have more money available to pay your required debts and your average monthly expenses. Our California bankruptcy attorney will carefully go over the pros and cons of filing for Chapter 13.
Call Our California Bankruptcy Attorney if Your Disability is Being Garnished
Bankruptcy is sometimes a scary word. However, in many cases, it is the right option to put an individual back on the road to financial stability. At The Bankruptcy Group, our attorneys and staff understand the negative impact of any garnishment. Call 800-920-5351 to schedule a free consultation with our California bankruptcy attorney and review your available options.