When someone considers bankruptcy, he or she probably feels fear of the consequences of bankruptcy, such as having the bankruptcy show up on future credit reports, for a period of time.
Benefits of Bankruptcy
The benefit of bankruptcy is a fresh start – the ability to rebuild credit and get back on top, and cessation of relentless calls from creditors.
Another benefit, less commonly considered, is prevention of the garnishment of wages.
If you don’t have enough money to pay your bills and feed your family, you don’t have enough money to pay your bills and feed your family. Period. You don’t have extra money to repay creditors, either voluntarily or through garnishment.
If you currently bring home a consistent paycheck, but have no ability to repay debts, consider bankruptcy. Bankruptcy may not be right for you, but it is always worth consideration if you find yourself in this circumstance.
Through bankruptcy, your debts may be forgiven or you may be granted the ability to repay debts, generally over three to five years, or a combination of both.
Yes, there are drawbacks to filing bankruptcy, such as its effect on your credit report.
You can re-establish good credit scores over time. The fact of filing bankruptcy only appears for a certain number of years as well.
Consider alternatives to bankruptcy too.
One such alternative may be negotiation of debt with creditors.
Another alternatives, such as allowing creditors to garnish your wages, may be harmful.
In order to understand this harmful alternative, you should understand how simple this process is for a creditor, once the creditor is aware of your income.
Negative Alternative – Wage Garnishment
Below are the basic steps a creditor takes to garnish wages of a debtor.
A debtor will first be served with a Garnishment Exemption Notice and Notice of Intent to Garnish Earnings at least 10 days before attempting to garnish wages.
- The creditor may serve this personally upon the debtor or by mail.
- A sample of the requirements in Minnesota for this Notice may be found in Minnesota Statute 571.925 or online at http://www.revisor.mn.gov/statutes/?id=571.925#stat.571.925.
- This notice is valid for one year.
There may be things you can claim as exempt from garnishment. The creditor may dispute your claims.
If there is no dispute, in order to proceed with garnishment, the creditor will need to serve the debtor’s employer with a Garnishment Summons and Disclosure Form.
- In Minnesota, an example of a Garnishment Summons may be found in Minnesota Statute 571.74 or online at http://www.revisor.mn.gov/statutes/?id=571.74.
- The creditor must mail to the debtor a copy of the Garnishment Summons and Earnings Garnishment Disclosure Form that he or she served on the debtor’s employer, within 5 days of service on the employer.
The creditor must also serve the debtor with a Notice to Debtor in no less than 14-point font.
- An example Notice to Debtor may be found in Minnesota Statute 571.74 or online at http://www.revisor.mn.gov/statutes/?id=571.74.
This process is relatively simple. Don’t think creditors won’t do it. Consider all you options, and choose one that actually helps you.