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Questions about Bankruptcy and Wages

Bankruptcy can have a large effect on a person’s finances and financial future. An individual needs to make sure he/she knows how bankruptcy may affect his finances, assets and various sources of income before he/she files for bankruptcy. Not knowing how bankruptcy may affect an individual’s wages can lead to the individual making hasty decisions about filing for a bankruptcy. Given below are popular questions about bankruptcy and wages asked by individuals.

For How Long Should an Individual Have to Work to Show Employment/Wages Before He/She Files for Bankruptcy?

There may be no time limit for an individual to be getting a salary before he/she can file for bankruptcy.

Would Unpaid Wages be Considered as Secured Debt in a Bankruptcy?

Unpaid wages may not be considered secured debt in a bankruptcy case even if the employee has a written contract guarantying him/her the salary. It may however, be given a priority status.

If a Company Files for Chapter 11 Bankruptcy, would a Judge Pay the Salaries of the Employees Before or After the Bankruptcy Filing Date?

The pre and post bankruptcy petition salaries may be handled differently by the bankruptcy court when a company files for Chapter 11 Bankruptcy. The salaries to be paid after the bankruptcy petition is filed may be given priority and paid before any claims for wages that were to be paid before the bankruptcy petition was filed. The pre petition salaries may also be considered to be priority claims but may be paid after the post bankruptcy petition salaries are paid off to the employees.

Where should an Individual Mention Accrued Wages on a Schedule B of a Bankruptcy Petition?

When filing for bankruptcy an individual may mention accrued and unpaid wages under point 18 of Schedule B under “other liquidated debts owed to debtor including tax refunds”

Can the Wages of the Head of a Household be Garnished for Debt Collection?

Wage garnishment rules may differ from state to state in the US. In some states like Florida, the wages of the head of the household may be exempt from any creditor claims. However, if the wages of the head of the household is above $500 a week, then they may be garnished for debt collection if the debtor agrees to it in writing.

Can an Individual be Forced to Work Without Wages if a Company Files for Chapter 11 Bankruptcy?

An individual may not be forced to work without wages if his/her company files for a chapter 11 bankruptcy. Asking an individual to work without wages may be considered an involuntary servitude.

Can an Individual File for a Chapter 7 Bankruptcy if his/her Wages are more than the Salary Requirements for a Chapter 7 Bankruptcy?

An individual may not be able to file for Chapter 7 Bankruptcy if his/her wages are more than the salary requirements for a chapter 7. There may be no exceptions to this rule. However, the individual may file for a Chapter 13 Bankruptcy and work out a repayment plan.

Would an Increased Income affect an Individual’s Projected Disposable Income in a Chapter 13 Bankruptcy?

According to the bankruptcy code, when an individual files for a Chapter 13 Bankruptcy, he/she may have to contribute the projected disposable income to the bankruptcy plan for the first 36 months of the plan. However, if the individual’s income changes during the first three months of the payment plan, he/she may not have to make changes to the disposable income. After the first three years of the repayment plan, the individual may not have to contribute any disposable income to the plan according to the bankruptcy code. If there is an increase in the individual’s expenses along with the change in salary, the bankruptcy trustee may not make any changes to the individual’s disposable income or the repayment plan.

Reading up about the effects of bankruptcy on wages will help individuals understand if filing for bankruptcy will affect all of their wages or not. Having more information about bankruptcy and wages can help individuals know where they stand and what steps they may need to take if their company files for a bankruptcy. If you are not sure of the impact of either your or your employer’s bankruptcy on your income, it’s always advisable to ask an Expert.

Ask a Bankruptcy Lawyer

FiveStarLaw
FiveStarLaw, Attorney
Category: General
Satisfied Customers: 3317
Experience:  Bankruptcy Lawyer. Experienced.
9968427
Type Your Bankruptcy Law Question Here...
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Bankruptcy Lawyers are online & ready to help you now

FiveStarLaw
Attorney
Satisfied Customers: 3203
Bankruptcy Lawyer. Experienced.
Terry L.
Attorney
Satisfied Customers: 2204
Better Business Bur 15yrs bankruptcy experience. Chicago Bar
Phillips Esq.
Attorney-at-Law
Satisfied Customers: 950
B.A.; M.B.A.; J.D.

Recent Wages Questions

  • Is it possible to get rid of student loans by paying them with

    Is it possible to get rid of student loans by paying them with credit cards and then either declaring bankruptcy or waiting till the credit card default is past the statute of limitations?
    I know that student loans are very hard to discharge normally in bankruptcy. If you pay them off with credit cards and then go bankrupt, would that work?
    Or if that would not work, what about paying the student loans with credit cards and simply defaulting on the cards (without bankruptcy)? I have an uncle with a lot of credit card debt. If I recall correctly, several of the credit cards ATTEMPTED to sue him in court, but were unsuccessful because they could not find his whereabouts and could not serve the papers. My uncle's highest balance credit card was about 20k. Collectively, with all the credit cards combined, he has about 50k in credit card debt, none of which will ever be paid. My uncle said he simply plans to stay off the radar and just let the stuff drop off eventually. His case is what made me consider the same strategy.
  • I was not able to pay my credit card debt and the credit cards

    I was not able to pay my credit card debt and the credit cards have turned this over to a collections agency. I still do not have the funds to pay - what can I expect to happen next?
  • Hello, I've had 3 student loans totaling more than 11,000 in

    Hello, I've had 3 student loans totaling more than 11,000 in which unfortunately I defaulted on. They have been garnishing my wages and intercepted my income tax last year. I currently owe 4,000 only. I've applied online to have the left over balances on the loans consolidated, therefore I can get a better monthly payment based off of my income. I would like to know if my request is accepted and my loans are consolidated removing me from default status; will the collection entity that's receiving the garnished payments be notified of my new loan status and stop the garnishment, notifying my employer of the same? I would definitely prefer to pay the Income based amount set with the new loan and have this status removed from my credit report versus continuing to allow the garnishment and it's causes a financial hardship in addition to not doing anything for my credit. Finally I'm at the point where as I'm ready to file for a chapter 7 bankruptcy at the initial start of the year. I'm wondering if I'm temporarily protected by the filing until my bankruptcy is discharged will they still intercept my tax return. I know the loans isn't dis-chargable under the filing, but it does however provide temporary coverage. I'm out of ideas, have a manageable balance on my loans, would like to figure a way to stop the offset of my taxes this year. Please help, if possible. Any advice would be greatly appreciated.
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