When you’re struggling to pay debts, wage garnishment only adds insult to injury. Let’s face it — who wants chunks of their hard-earned paycheck taken out every month? In fact, the court can order your employer to take as much as 25% of your paycheck to pay creditors. How can you get back on your feet financially when you’re losing a significant portion of your income?
Fortunately, you have options. While it may not seem like an appealing prospect, filing for bankruptcy can help. Below, we discuss how to stop wage garnishment through bankruptcy.
How Can Bankruptcy Stop Wage Garnishment?
When you file for bankruptcy, the court will issue an “automatic stay”, which prevents your creditors from collecting on your debts. This stay prohibits many forms of debt collection efforts, such as foreclosure and wage garnishment.
Though the automatic stay can be a very powerful tool, it’s important to remember that this is only a temporary solution. In some cases, if you’ve filed for bankruptcy in the past, the stay may only last for 30 days. However, if you complete the bankruptcy process and your debt is discharged, you will effectively stop wage garnishment permanently.
Can Bankruptcy Stop Wage Garnishment for All Types of Debts?
No. Unfortunately, not all types of debts can be discharged through bankruptcy. This means that wage garnishment for certain types of debts will continue.
For instance, if you are facing wage garnishment for back taxes, you may receive a temporary stay from garnishment. But since back taxes cannot be discharged through bankruptcy, once the stay is over, your wages will go back to being garnished.
In addition, filing for Chapter 7 bankruptcy for child support or alimony debt will not stop wage garnishment, since neither debt can be discharged through Chapter 7. On the other hand though, you can file for Chapter 13 bankruptcy for these types of debts and stop wage garnishment. But you must continue to make your monthly Chapter 13 plan payments to keep wage garnishment at bay.
Notify Your Creditor to Stop Garnishment as Soon as Possible
After filing for bankruptcy, it can take up to a week or more before the official notice is sent out to all creditors. Therefore, you should notify your employer and creditors directly in order to stop wage garnishment as soon as possible. Provide them with your bankruptcy case number, court location, and filing date.
Once notified of your bankruptcy, your creditors must halt all garnishment, or they would be violating the automatic stay court order.
Can You Recover Wages Lost by Garnishment?
While you can recover certain wages lost by garnishment, attempting to do so is usually not worth it. The process involves many complicated rules and conditions.
In order to recover wages lost by garnishment, the garnishment must have occurred within a 90 day period before your bankruptcy filing date. In addition, the amount lost must exceed a specific number (that changes periodically), and be protected by an exemption, or a law that lets you keep specific property from bankruptcy.
The issue most people encounter is that most states do not hold exemptions for cash. Plus, even if they do, you’ll then need to file a lawsuit against your creditor, which means you must weigh the cost of the lawsuit against the amount you lost.
What Happens Once Bankruptcy Ends?
Once your bankruptcy is finalized and your dischargeable debt is discharged, creditors can no longer garnish your wages. Debt that can be discharged through bankruptcy includes personal loans, credit card balances, and medical bills.
However, for nondischargeable debt, such as student loans, child support, and taxes, wage garnishment will continue after the court dismisses your case.
Learn More About How to Stop Wage Garnishment
If you’re facing wage garnishment, filing for bankruptcy may be your best option to regain control of your finances. A North Charleston SC bankruptcy attorney can help you get a fresh financial start. Contact Steadman Law Firm today to learn more.