Threatened With Garnishment? One Attractive Debt Workout Exists as an Alternative to Bankruptcy.


Author:  Attorney Thomas J. Casey


Although bankruptcy is a common option for people who have considerable debt, it does not provide a solution for everyone.  Sometimes, there are valid reasons for avoiding bankruptcy.  Some people are not eligible to file bankruptcy, or they own assets that will not be protected if they file bankruptcy.  Others may have too much income to qualify for a Chapter 7 bankruptcy.

One alternative that exists is called “Voluntary Amortization of Debts”.  This alternative is set forth in Wisconsin Statutes Section 128.21.  It provides a State Court alternative to bankruptcy.

There are certain advantages that might make this State Court remedy more desirable than bankruptcy for some debtors.  In a Voluntary Amortization, it is required that the entire amount of the debt(s) included be paid in full within thirty-six (36) months, but no additional interest is allowed to be added to the debt during that period of time.

Unlike bankruptcy, the person filing gets to choose which debts are to be included and which will be left out.  During the pendency of a Voluntary Amortization, any creditor included may not take a collection action against the debtor to seize assets or to garnish wages.  Moreover, the payment under the Voluntary Amortization may be considerably less than a garnishment.

For example, one of the most common forms of collection involves the garnishment of a debtor’s wages.  If a debtor owes $10,000.00 on a credit card debt and a judgment is entered against the debtor, there will be additional post-judgment interest added at the rate of 4.25% or $425.00 per year.

A garnishment takes 20% of the debtor’s take-home pay each pay period.  For someone earning $50,000.00 annually, the garnishment may take approximately $600.00 per month, and interest will continue to accrue until the debt is paid in full.  If that same person filed a Voluntary Amortization, they could pay $300.00 or less per month toward the debt, interest free.

Filing a Voluntary Amortization has much less detrimental impact on someone’s credit as opposed to bankruptcy, as the person filing is actually paying their debt in full, rather than seeking to discharge the debt in bankruptcy.  The cost of filing a Voluntary Amortization is normally much less than a bankruptcy proceeding.  The Voluntary Amortization is much easier to file than a bankruptcy and can be filed more than once.  There are no court appearances and a person is not required to list their assets or risk losing any of their assets.

Anyone facing an earnings garnishment may want to consult with an attorney to see if a Chapter 128 Voluntary Amortization can provide them with a reasonable alternative.