Can Bankruptcy Stop Wage Garnishment: How It Works and What to Expect
Wage garnishment can be a serious financial burden, especially for individuals already struggling to make ends meet. However, bankruptcy can offer a solution to those facing wage garnishment. This article explores how bankruptcy can stop wage garnishment and what to consider when pursuing this route.
Understanding Wage Garnishment and Bankruptcy
Wage garnishment is a process by which a portion of an individual's paycheck is directly deducted to pay off a debt. While wage garnishment is a powerful tool for creditors, it can create significant financial strain. In some cases, individuals find relief in filing for bankruptcy.
According to finance strategists, bankruptcy may be able to stop wage garnishment. This is primarily due to the implementation of an automatic stay, which is a court order issued by the bankruptcy court to halt all collection activities by creditors. This automatic stay can immediately cease wage garnishment and other collection efforts.
Automatic Stay and Wage Garnishment
Upon filing for bankruptcy, a court will issue an automatic stay that prohibits creditors from continuing collection activities. Once creditors receive notice of the automatic stay, they must cease any wage garnishment or other debt collection actions. Additionally, if creditors wish to continue these activities, they must petition the court to lift the stay.
It's important to note that the automatic stay temporarily stops wage garnishment, but it doesn't eliminate the underlying debt. Therefore, the garnishment will automatically resume once the bankruptcy case is completed and dismissed. This is particularly relevant for debts such as child support, which are not discharged in bankruptcy proceedings.
Bankruptcy and Child Support Garnishment
Child support obligations are a unique case. Since these obligations are considered non-dischargeable, wage garnishment for child support cannot be stopped by filing for bankruptcy. This means that even if you file for bankruptcy, the garnishment for child support will continue.
However, you can temporarily stop these garnishments using the automatic stay. Your bankruptcy attorney can file a motion to stop the garnishment, though it's worth noting that these garnishments will resume once the bankruptcy proceedings are concluded.
Chapter 13 Bankruptcy and Wage Garnishment
If you file for Chapter 13 Bankruptcy, you can prevent wage garnishment or stop existing garnishments. The automatic stay immediately takes effect, providing a temporary reprieve.
During the bankruptcy proceedings, if you have wage garnishments for child support, your bankruptcy attorney may be able to temporarily halt the garnishment. However, the money owed for child support cannot be discharged even if you're approved for a payment plan under Chapter 13. The court must approve the payment plan, and you must adhere to it to prevent wage garnishment.
How Long Does it Take to Stop Wage Garnishment?
It typically takes 10 days or less for the court to process and send out the information/notification to your creditors. It's crucial to have your bankruptcy lawyer call your employer immediately and fax them the court's stamped order and case number. Sometimes, a simple phone call and a fax to your employer’s payroll department are sufficient. Later, a certified letter with attached documents might be needed to follow up.
Failing to take these steps promptly can result in your employer not realizing the stay until it's too late, and your next paycheck may still be garnished.
Recovering Previously Garnished Funds
While the automatic stay can prevent further garnishment, recovering the funds already taken out of your paycheck is another matter. If your bankruptcy is filed within 90 days of the garnishment, you may be able to recover a greater portion of the funds. However, the recovery process is complex and requires the assistance of a competent bankruptcy attorney.
A good attorney can help explain the process, the complexity, and the associated costs. The exact amount and process of recovery will depend on your specific circumstances and the local legal requirements.
Conclusion
Bankruptcy can provide a lifeline for individuals facing wage garnishment. By preventing wage garnishment through an automatic stay, bankruptcy offers a temporary relief from the financial strain of garnishment. However, it’s important to understand the limitations and the specific processes involved. Consulting with an experienced bankruptcy attorney is essential to maximize the benefits and navigate this process effectively.