Bankruptcy vs. Traverse of Garnishment in Georgia

There is a lot to understand regarding bankruptcy vs. traverse of garnishment if you are struggling with debt in Georgia. If you have a wage or bank garnishment in Georgia, chances are you are wondering whether you should file a traverse to fight the garnishment or file bankruptcy to stop the garnishment. In order to determine which course of action is the best for your situation, you must understand the concepts of (1) collecting a judgment in Georgia; (2) the basis for a traverse; and, (3) how the bankruptcy stay stops a garnishment.

Judgments and Garnishments in Georgia: A Two-Step Process

Getting to the garnishment stage requires the filing of TWO separate lawsuits. To understand a traverse, you must understand this process.

Lawsuit #1: Obtaining the “Judgment”

Before a creditor can garnish your bank account or your wages, it must obtain a judgment against you. A judgment is simply a court order stating that you owe the creditor X amount of money. To obtain a judgment, a creditor must:

• sue you in a Georgia court (in the county in which you live);
• personally serve you with a copy of the lawsuit (or serve the lawsuit to someone who lives in your household; or, if you cannot be found, serve you by publication); and,
• prove that you owe the money.

Or, if you do not respond to the lawsuit at all, the judge will issue a “default judgment” against you in the amount that the creditor sought.

After a creditor has a judgment in hand, it can collect on the judgment through several means, including:

• garnishment of wages
• garnishment of bank accounts
• levying of property, such as vehicles
• recording a lien on all property (including real estate), so that when the property is sold, the lien must be satisfied.

Lawsuit #2: The Garnishment

In order to garnish a bank account or wages, a creditor must already have a judgment. The creditor takes the judgment and files a new lawsuit, which is known as the garnishment suit. The creditor must serve the bank or employer with a copy of the garnishment lawsuit. At that point, the bank or employer must answer the garnishment suit and withhold and pay money to the court. A bank must send up to the total amount of the judgment; and, an employer must withhold 25% of your net earnings.

You, as the debtor, may file a traverse or your own answer opposing the garnishment suit. However, it is often too late when the creditor has already gotten to the garnishment stage.

Bankruptcy vs. Traverse of Garnishment in Georgia

Under Georgia law, you may file an answer to a garnishment lawsuit that is known as a traverse. The basis of a traverse is that the judgment is void or there is something wrong with the garnishment (ie. you’re not the person against whom the original judgment was rendered or the money in the bank account is not yours or the money in the bank account is social security income not subject to garnishment).

Most of the time, in order to challenge the garnishment (Lawsuit #2), you really have to challenge the validity of the underlying judgment (Lawsuit #1). For example, the creditor filed Lawsuit #1 seeking a judgment for $5,000.00 against you. The creditor filed an entry of service stating that it served you with the lawsuit at 123 Main Street, Atlanta, Georgia on May 1, 2012. At that time, you lived at 123 Broad Street, Atlanta, Georgia, so there was no way you could have received personal service at the Main Street address. A year later, the creditor filed a garnishment with your employer (Lawsuit #2) based on the $5,000.00 judgment from 2012.

Under those circumstances, you would file a traverse of the garnishment suit, alleging that you were never served with a copy of Lawsuit #1 in 2012. You would also be required to go back to Lawsuit #1 and petition the court in that case to reopen the case so that you can prove that you were never served with a copy of Lawsuit #1. The judge in the garnishment matter would likely put the garnishment suit on hold until you resolved the issue in Lawsuit #1. However, even if the judge in the garnishment suit keeps the case on hold, your employer still has to continue to send your wages to the court to hold. If you won, the court would send you your money back.

Sounds complicated, right? That’s why sometimes, it is just easier to file bankruptcy in order to stop a garnishment in Georgia.

How Bankruptcy Stops Garnishments in Georgia

Filing bankruptcy immediately stops a bank or wage garnishment in Georgia because a bankruptcy creates what is known as a “stay,” which is just a fancy word for stopping all creditor actions. When a debtor files a bankruptcy case, the creditor has to stop pursuing collections efforts, including a wage or bank garnishment.

After filing a bankruptcy case, I typically file a notice of bankruptcy in the garnishment suit. Some courts will “stay” the action; some courts will dismiss the action. Some creditors will dismiss the garnishment upon receiving notice of the bankruptcy case. If you have no assets to which the judgment (from Lawsuit #1) can attach, then the judgment can also be avoided under bankruptcy law.

When Should You File a Traverse?

1. When the bank garnishment is on money that cannot be garnished, such as social security income;
2. When you were never served with Lawsuit #1;
3. When the judgment in Lawsuit #1 is not against you (maybe someone else with the same name); or,
4. When you do not own the bank account being garnished (ie. it is your business name and the judgment in Lawsuit #1 is against you personally).

When Should You File a Bankruptcy?

1. When you have more than just this one garnishment debt;
2. When you cannot show that the judgment is invalid (ie. because you were properly served);
3. When disputing the garnishment and judgment could cost you more money and time than filing bankruptcy; or,
4. When you cannot afford to lose 25% of your net income while challenging the garnishment/judgment;

Are There Alternatives to Bankruptcy or Traverse?

You can always look to settle the garnishment suit with the creditor. You are most likely to succeed in settling a garnishment debt in Georgia if you are able to offer a lump sum of money to the creditor. If you have no basis for filing a successful traverse, you could start with trying to settle the garnishment suit and use bankruptcy as a last resort.

Bankruptcy vs. Traverse of Garnishment: Obtain Legal Counsel

As you can see, Georgia laws regarding traversing a garnishment makes it difficult to stop a garnishment. If you have received a bank or wage garnishment and want to look at all of your options with an Atlanta attorney, please call the Law Offices of Charles Clapp at 404.585.0040 for a free consultation.