When you’re facing financial hardship, wage garnishment can add insult to injury. The last thing you need is to get chunks of your paycheck taken out every month in order to pay creditors.
While it may not sound like an appealing option, bankruptcy can help. Below, we discuss how to stop wage garnishment with bankruptcy. If your wages are being garnished and you need a way out, Gregory J. Wald, Attorney at Law can help. Contact us to speak to a Minneapolis bankruptcy attorney today.
What Is Wage Garnishment?
Wage garnishment occurs when a creditor wins a lawsuit against you and receives a court order. The order will compel your employer to send them part of your paycheck. A creditor will seek wage garnishment when you are behind on your debts and their other collection efforts have failed.
Typically, your employer will take 25% of your paycheck, which is the maximum set by federal law. But this depends on the type of debt being paid through garnishment. Garnishments for student loan debt can take 15% of your paycheck. Child support and tax debts will garnish much more of your take-home pay.
Certain types of debts can be garnished automatically without a court order. If you’re behind on child support, you can be subject to an automatic wage withholding order. Owing back taxes or defaulting on a student loan will prompt the federal government to automatically garnish your wages.
How Does Bankruptcy Stop Wage Garnishment?
Wage garnishment can be problematic. It can push you to extreme financial hardship, making it difficult to cover regular expenses. It may even push you into bankruptcy. While this may sound like bad news, bankruptcy provides a silver lining: a way to stop wage garnishment.
Bankruptcy stops wage garnishment through a court-ordered injunction called an “automatic stay”. Once you file for bankruptcy, the automatic stay goes into effect, prohibiting most creditors from any debt collection efforts. This includes most wage garnishments and any new ones that creditors might seek while your bankruptcy is in process.
At minimum, an automatic stay gives you temporary relief from wage garnishment. It could provide you permanent relief from wage garnishment if the debt that caused it will be erased through bankruptcy. This includes debt from credit cards, medical bills, and court judgments, which can be discharged through Chapter 7 bankruptcy. Chapter 13 bankruptcy could reduce the debt and have you repay it through a three- to five-year repayment plan.
For other debts, such as back taxes, that cannot be discharged in bankruptcy, wage garnishment will only stop temporarily. After your bankruptcy case is complete, you will have to go back to paying the debts.
Wage garnishment for child support or alimony you owe will not stop by filing for Chapter 7 bankruptcy. Past due child support and alimony are also not discharged in Chapter 7 bankruptcy. So, if your wages are garnered for child support or alimony, the garnishment will continue during and after your Chapter 7 bankruptcy proceedings. On the other hand, filing for Chapter 13 bankruptcy stops all wage garnishments, including for child support and alimony.
How a Bankruptcy Attorney Can Help
Once you file for bankruptcy, a week or longer may pass before your creditors are notified. So, to ensure your wage garnishment stops quickly, you’ll need an experienced bankruptcy attorney if you don’t have one already. They can work with you to send the official notice to your creditors. They can also notify your employer and creditor who’s garnishing your wages about the bankruptcy filing and automatic stay. As soon as your creditor is notified of your bankruptcy, they must stop the wage garnishment.
Can You Recover Garnished Wages?
Recouping your garnished wages could prove to be a futile effort. You must first make sure that the wage garnishment occurred within 90 days of filing for bankruptcy. The amount garnished will also need to be above a certain amount and be exempted by law from bankruptcy. Then, you’ll need to file a lawsuit against your creditor, which could cost you more than you’d recover.
Can Your Wages Be Garnished After the Bankruptcy Ends?
Creditors can’t start wage garnishment again after your bankruptcy is closed on discharged debts, including credit card and medical bills. Because bankruptcy wipes out these debts, creditors can’t come after you for it.
On the other hand, creditors can restart wage garnishment on non-dischargeable debt, including student loans, taxes, and child support. They can also resume wage garnishment if the court dismisses your bankruptcy case without discharging your debt.
Learn More About How to Stop Wage Garnishment With Bankruptcy
If you’re facing wage garnishment and insurmountable debt, an experienced Minneapolis bankruptcy attorney can help. At Gregory J. Wald, Attorney at Law, we understand how life’s events could put you in this situation. We are available to evaluate your situation and help you understand whether bankruptcy is right for you. Call us today.