Can Filing Bankruptcy Stop Wage Garnishments?

Filing bankruptcy can stop certain forms of garnishments and it can also wipe out other types of debt. If you are considering bankruptcy, you must first decide on what bankruptcy form is the right choice for you. Experienced Towson bankruptcy attorneys may assist you on how to file and understand basic bankruptcy laws.

Whenever a creditor uses wage garnishment to recover a debt, it is not easy to pay basic living expenses. In most bankruptcy cases. The employer can deduct around 25% of your income depending on the types of debt you owe.

Covered in this article are:

–               The automatic stay

–               Forms of wage garnishment

–               Immediately stopping garnishment

–               Recovering wages prior the bankruptcy filing

–               Dismissal of the bankruptcy case

–               The need to consult with trusted Towson bankruptcy attorneys

The automatic stay

Once you file a bankruptcy petition, a court order called automatic stay takes place. When you file for bankruptcy, debt collectors are prohibited from continuing collection activities. This includes wage garnishment, repossession, and foreclosure.

The automatic stay is beneficial for a bankrupt debtor. However, it does not apply to all. For instance, if you have filed bankruptcy several times, the automatic stay can only last up to 30 days or may not be imposed by the bankruptcy court at all.

Forms of wage garnishment

The automatic stay would not cover all creditors or all debts. For example, wage garnishment will not be stopped if you have filed bankruptcy Chapter 7 and the debts are for domestic obligations such as child support and alimony.

Domestic support commitments are not forgiven when you file bankruptcy. The creditor is not required to stop garnishing wages while the Chapter 7 bankruptcy case is ongoing.

On the other hand, all forms of garnishments including domestic support obligations would be stopped when you file bankruptcy Chapter 13. Keep in mind that if you file for a Chapter 13 repayment plan, your debts should be paid in full in a span of 3 to 5 years. As a result, while you are making monthly payments, wage garnishment would be stopped.

Can the bankruptcy petition immediately stop wage garnishment?

After you file a petition in bankruptcy, it may take a week for the bankruptcy court to deliver the official case notice to all creditors. You and your bankruptcy lawyer can notify both the creditor and employer of your bankruptcy case number, including the filing date and court location, to ensure that the garnishment ends right away.

Even though the employer has not obtained a court notice, the garnishment must end once the creditor learns about the bankruptcy case. Permitting the garnishment to continue will be a violation of the automatic stay.

Recover wages prior the bankruptcy filing

You can recover some garnished income but it will not be worth the cost in most situations. It is normally preferable to prevent a loss by filing for bankruptcy as soon as possible.

The garnishment must have taken place within 90 days of the filing date. It must surpass a certain amount which varies significantly from case to case and you must be capable of protecting that amount with an exemption.

The problem is that most of the states do not have a cash exemption or if they do, it is just a small one. In addition, you will have to sue the creditor to get the money back.

Dismissal of the bankruptcy case

Creditors are not allowed to garnish discharged debts such as credit card bills, medical bills, and personal loans until the bankruptcy case is completed. Debts that are not dischargeable, on the other hand, maybe garnished and you will always be liable for paying those debts.

You lose the protection of the automatic stay if the court dismissed your bankruptcy case without obtaining a bankruptcy discharge. This means that creditors may continue garnishment and debt collection activities for any form of debt.

Consult with trusted Towson bankruptcy attorneys

Seeking legal advice from someone who is knowledgeable with bankruptcy law and is experienced in handling bankruptcy cases is important. Doing so will help prevent legal issues during the bankruptcy process. Hire the best bankruptcy attorney for you to have a fresh start with your finances. Contact our Towson bankruptcy attorneys at Grafton Firm, LLC for a free consultation.