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Bankruptcy conversion could mean returned wage garnishments

In most legal cases, the courts tend to rely on precedents established by previous cases with similar issues, but when a case comes along with unique, complex or extenuating circumstances, judges with higher authority are often required. Some of these cases make it all the way to the Supreme Court of the state or country, at which point a decision is made which establishes the precedents for other such cases in the future.

Such a case was recently settled by the United States Supreme Court involving a bankruptcy vexation that has confused courts for nearly three decades. According to the unanimous decision, debtors who file for Chapter 13 bankruptcy and then convert their filing to a Chapter 7 bankruptcy can be refunded undistributed funds from wage garnishment that was part of the Chapter 13 filing.

It all started in a Texas court, where a federal judge ruled similarly to the Supreme Court that a man was entitled to retrieve money that had not been distributed to creditors at the time of the Chapter 7 conversion. The 5th circuit held a different opinion, so the Supreme Court decided to intervene near the end of last year.

It is worth mentioning that there are exceptions to every rule, and the official eligibility for such a reimbursement may vary depending on your circumstances. In order to know if this reimbursement could apply to you, it is highly recommended that you consult with an attorney about your case. The same can be said for any bankruptcy case, because the laws surrounding bankruptcy can be quite complex, and when you are dealing with wage garnishment or asset liquidation, you cannot afford to take any chances.

Source: Courthouse News Service, "Bankruptcy Leftovers Go to Debtor, SCOTUS Says," William Dotinga, May 18, 2015

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