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Will bankruptcy help you recover money from garnished bank account?

by Dorota Trzeciecka on January 22nd, 2015

You fought garnishment of your bank account in state court and lost.  You were thinking of filing bankruptcy, but did not get around to it.  Can you recover money from the garnished bank account, if you file bankruptcy?

The answer to the question depends largely on whether or not you can show in bankruptcy court that the garnished funds are exempt under Florida Statutes, Chapter 222, which governs exemptions in Florida in both, state court and bankruptcy court proceeding.

Under Section 547 of the Bankruptcy Code, Preferences, the bankruptcy trustee can reverse any transfer that the creditor made from the  account of a debtor within 90 days of the filing of a bankruptcy petition.   The trustee would generally exercise his/her powers to reverse such transfer, if the amount of the transfer was large enough to cover trustee’s expenses, and brought significant amount into the bankruptcy estate for the benefit of all creditors. If the amount of the transfer is too small to cover the expenses, or if the funds are exempt, the trustee is unlikely to purse the reverse of such transfer.

If the trustee does not exercise the power to reverse the transfer, the debtor can then step into the shoes of the trustee, and recover the garnished funds, provided, of course, that  Florida exemption statute protected the funds and returned it to the debtor.