How Can Bankruptcy Help Avoid Wage Garnishments?

Wage garnishments can be the kiss of death for consumers who are just getting by. If your wages have been garnished and you feel you fall into this category, don’t despair, you’re not alone. It turns out that 80% of employees in the United States live paycheck to paycheck and there is nothing left at the end of the month.

Creditors who are trying to collect past due accounts or have a judgment against you will often try to collect those debts through wage garnishment. Depending on the type of debt, wage garnishments can take a quarter or 25% of your basic take-home pay. This is the amount your employer will send to your creditor, and you’ll end up with the rest, a much smaller paycheck. The problem is that most people can barely make it on their current take-home pay, so taking 25% will cause a cascading effect, meaning you won’t be able to pay your other bills, or worse, you won’t have any money left over. for food.

Note: If you have child support wage garnishments, all bets are off and the 25% does not apply

Bankruptcy can stop most types of wage garnishments

If you file Chapter 13 bankruptcy, you may be able to avoid wage garnishment or stop existing wage garnishments, at least while the proceedings take place. This is because an “automatic stay” begins when you file for bankruptcy. Automatic suspension is a court order or injunction. Ask your bankruptcy attorney how long your automatic stay will last, depending on your situation.

If you have a child support wage garnishment, your bankruptcy attorney may be able to temporarily stop it, but since these types of garnishments fall into a different category, you will not be able to discharge the money owed in Chapter 13 bankruptcy. will do. You will be allowed to submit a 3 to 5 year plan, as long as you are making the plan payments. The court must then approve the plan. You will need a good attorney to help you get your plan approved and moving forward.

If I file for Chapter 13 Bankruptcy; How long does it take to stop wage garnishments?

It usually takes 10 days or less for the court to process and send the information/notice to your creditors. It is important that your bankruptcy attorney immediately call your employer and fax you the court-stamped warrant and/or case number, specific court, and filing date. Sometimes all it takes is a quick phone call and fax to your employer’s payroll department. An official certified letter from an attorney can then be sent with the documents attached for follow-up.

If this is not done quickly, your employer may not catch on in time and deduct the wage garnishment from your next paycheck. Time is of the essence. These things will not happen without action.

Can I get back wage garnishment money that has already been taken out of my paycheck?

Yes, it is possible to recover some of the money withdrawn in wage garnishment before you filed for bankruptcy, although it is very difficult to recover money that was withdrawn more than 90 days earlier. A good bankruptcy attorney in your area can explain how it works, why it’s difficult, and how much it will cost. There will be additional paperwork to file with the court, and in some states you may need a “bankruptcy waiver” filing so you can keep and protect that money from bankruptcy proceedings.

Yes, this can get complicated, but an experienced bankruptcy attorney knows the bankruptcy laws in your state and can figure out how to proceed. Because there is an ‘real cost’ to filing more paperwork or lawsuits to recover money, he may decide to waive that cost. Your attorney will explain.

After bankruptcy proceedings are finished, will my creditors restart my wage garnishment?

After your bankruptcy, your creditors can only apply wage garnishments to non-dischargeable debts. Any debt discharged by bankruptcy is no longer owed and deemed uncollectible by the court. Your creditors cannot restart wage garnishments on any of those prior debts. If they tried, that money is not owed and your former creditors would be violating a court order.

How can I get more information about my legal rights in bankruptcy?

Since bankruptcy law is a moving target, and since laws vary from state to state, it is best to find an experienced bankruptcy attorney who is licensed in your state. Ask them any questions you have and listen carefully to their answers. Bankruptcy sounds unattractive to many, but it can be a powerful strategy to get your financial situation back on track.