Wage garnishment laws vary by state, but in Utah, when they garnish your wages, they are going to take about 25% of your income, so if you consider how much money you’re making and all of a sudden, take a 25% cut out of that, unless you’re making an awful lot of money, in which case you probably wouldn’t be faced with a wage garnishment issue because you would have been able to pay your debts off in the first place, but for other than those people that are making lots of money, 25% is going to hurt almost everybody.
For most people, it’s going to be unacceptable so that you’re not going to be able to make your rent, pay for your food, pay for your kids’ clothes and school expenses, and things like that. When somebody’s wages get garnished, that’s one of the reasons that they will seek bankruptcy, because that income is something that you cannot live without.
Does A Gambling Problem or Drug Addiction Ever Lead to Bankruptcy?
I don’t typically ask too much of my clients. I ask about their financial situation, I try to respect people’s privacy. You can tell me anything, I’m not going to judge you, and sometimes it’s important for me to know that kind of stuff.
If you have a gambling addiction, for instance. Here in Utah, that’s probably less common than in some states because we don’t necessarily have casinos, although Nevada is real close and there is a town close to Salt Lake called Wendover where people go and gamble. There are people around with gambling problems and if they have something like that or some other addiction that’s causing a problem like that, then, yes, that can obviously take all your money and throw you into a situation where bankruptcy can help you.
I would consider dealing with the addiction problem first, because if you have a gambling problem, then you file bankruptcy and then you still have a gambling problem, then you might even be in a worse position, because now you can’t file bankruptcy again for eight years because you’ve gotten a discharge and you’re saddled with a lot of debt because you’re still having a gambling problem. If you have an addiction that is causing something like that, a bankruptcy can help you out, but you need to be careful about the timing; I would focus on the addiction problem first.
What Are the Reasons that People Start Taking from their Own Retirement Accounts?
It’s a combination of a few things. One of them is a desperation or fear preventing us from considering all the options and thinking outside of the box. You’re presented with a situation where you need money and you panic and take it from the first place that you can think of, which is your retirement.
Another thing is people sometimes have an unrealistic outlook; they think that things are going to get better just by themselves, even though you are working the same job and the same hours in the same place that you are going to somehow start making more money and be able to pay off your debt. They think, “I’ll take this out of my retirement and I’ll pay it back later” and that never happens. Unless you have some change in circumstances, you’re not going to be able to do that.
The third reason that that happens is that people are afraid to consider bankruptcy. They have this huge stigma against it, they might feel it’s immoral, they might feel ashamed or embarrassed to consider it or are afraid that someone is going to find out that they are doing it and that causes them to do something really that they shouldn’t be doing, which is dipping into your retirement and hampering yourself for the future when really a much better situation might be to file bankruptcy.
Can High Medical Bills Be a Reason for filing Bankruptcy?
Yes, absolutely. I’m curious to see how this is going to affect bankruptcy in the future, because as we all know, whatever your political stance is, a lot more people have health insurance now. It hasn’t been long enough for me to really see the trend and whether that’s going to affect people filing bankruptcy because of medical bills, but one thing is that before people had health insurance, if they were without insurance and they had a medical bill like that, it’s so expensive, it’s insane. You can’t go to the ER without spending a few thousand dollars treating something minor if you don’t have insurance.
Even now, if you have insurance, you might be in a situation where it still costs you a ton of money. So, depending on your situation, that absolutely can throw you into the mix and I’m still getting clients now that have medical bills that are a few years old from before they had health insurance that they need to take care of that they can’t handle right now. We’ll kind of see in the future how things are going to happen with the health insurance and whether that’s going to make a huge difference with the bankruptcy filings but it’s going to continue to be an issue even still.
For more information on Wage Garnishments, a free initial consultation is your next best step. Get the information and legal answers you’re seeking by calling (801) 441-2013 today.