An article in the Washington Post, on Monday, discusses the results of an Associated Press analysis that concluded that there is a direct correlation between states that allow debt collectors to seize wages and strikingly high bankruptcy rates. The relationship between garnishment of wages and an increase in the cases of bankruptcy filed emphasizes the concern of many consumer advocates that the practice pushes people into bankruptcy court by increasing their financial stress.

The Associated Press study showed that North Carolina, South Carolina, Pennsylvania, Florida and Texas, states that prohibit or strongly limit wage seizures, have radically lower rates of bankruptcy than most others. The rate in those five states is 42% lower than it is nationwide.

In order to seize someone’s wages, creditors must obtain court approval and the Federal and State law usually limits how much can be taken to approximately 25%. Keep in mind that if a person files for bankruptcy via Chapter 13 or Chapter 7, it overrides a court order to garnish his or her wages. This explains why bankruptcy filings are greater in states that allow garnishment of wages by creditors. Often just the threat of having their wages seized cause people to consider filing for bankruptcy. Bankruptcy rates may also be affected by other state laws that rule on foreclosure proceedings or regulations on debt-to-income ratio.

If you are in need of help with your financial difficulties, or are under threat of having your wages garnished, please feel free to contact me via phone (303-955-7570) or email (help@cobankruptcyhelp.com).