Can Bankruptcy Stop A Wage Garnishment?
A significant percentage of Americans are living paycheck to paycheck, and any disruption in those hard-earned wages is only going to make their financial situation more difficult for them.
If you have been hit with wage garnishment, there is a chance that creditors can take as much as 25% of your take-home pay, and even more in some cases. This could make it difficult — if not impossible — to make ends meet each month.
Fortunately, you may be able to stop those wage garnishments and even get back some of that money that was pulled from your paycheck if you decide to file for bankruptcy.
The Automatic Stay in Bankruptcy Stops Wage Garnishments
As soon as you file for bankruptcy, you will receive what is called an “automatic stay,” which prohibits creditors from garnishing your wages as well as continuing any collection actions against you. When you file for bankruptcy, each creditor must be listed in your case so that the court can notify them of your bankruptcy filing.
It can take a week or more for creditors to get the bankruptcy notice to stop taking money out of your paycheck. In the meantime, your attorney will notify your employer and the garnishment creditor with the relevant information for your case.
The automatic stay will remain in effect until your bankruptcy is finished. In most cases creditors who are causing you these garnishment headaches will stop the garnishment. If those debts are discharged, you won’t have to worry about further collections once your case is finished.
The courts will not, however, allow you to keep filing for bankruptcy to stop wage garnishments indefinitely. If you have filed for bankruptcy repeatedly in the past two years with no intention of moving forward with a case, the automatic stay will be either very short or non-existent.
Recovering Wages Garnished Before Filing for Bankruptcy
There is also a chance that you will be able to get some of the garnished wages back after you file for bankruptcy. Any funds that are being held by the clerk of the court at the time of your bankruptcy filing, which haven’t yet been disbursed to creditors, may come back to you after the filing of your case. Also, any funds that are taken out of your paycheck after you file for bankruptcy are yours according to federal bankruptcy law.
Limits Concerning Wage Garnishment
While the bankruptcy automatic stay will give you collections and garnishment relief from debts such as taxes and student loans, these are not dischargeable debts in bankruptcy. This means that you will either need to come up with a plan to repay these debts or the garnishment will re-start once your bankruptcy is finished.
Garnishments related to child support are considered in a special category. You will have to continue to pay your monthly child support payments for ongoing child support. As far as back child support, a bankruptcy filing may be able provide you with an automatic stay. The attorney will have to review your case to determine how to handle back child support with a bankruptcy filing.
Speak with a Bankruptcy Attorney Now About Stopping Wage Garnishment
You can stop wage garnishment and other intrusive collection activities with a few simple steps. At the Dansby Law Firm, we understand that our clients may be in serious financial straits and we will do everything possible to help.
If wage garnishment is making your situation even more severe and preventing you from paying your primary living expenses, our experienced debt relief attorneys can help put an end to these actions so that you can rebuild your life. Contact our Montgomery office at 334-834-7001 or reach us online to schedule a free consultation.