If you’re facing a pile of debt that you just can’t seem to pay off, the well from which you draw funds to pay back creditors can quickly run dry. In the event that you can no longer afford to make repayments, the court may order your employer to withhold a certain amount of money from your paycheck. These funds will then be distributed to the person or institution to which you owe until your debt is repaid, a process known as wage garnishment. What many debtors don’t realize, is the potential that lies in filing for bankruptcy to stop garnishment.
While filing for bankruptcy doesn’t seem like the best solution to your credit problems, it can certainly give you a bit of an upper hand if it looks like you’re headed for wage garnishment. By using bankruptcy to stop garnishment, you have more control over your money and to whom you give it.
How Common is Wage Garnishment?
The process of garnishing wages isn’t the first stop creditors make when trying to collect funds from a debtor. It’s a step that occurs later in the life of the debt, once payments stop coming in. It tends to be a last resort for creditors, as they can’t begin to garnish you wages without first suing you and winning the case in court.
There are limits to how much of your wage can be garnished from your paycheck every month, and exemptions are available to protect even more funds from collection. So, while garnishment is not an overtly common practice, using bankruptcy to stop wage garnishment can save you some money and time by giving you more control over both your debts and funds.
How Chapter 7 Bankruptcy and the Automatic Stay Stop Garnishment
As soon as you file for Chapter 7 bankruptcy, you are immediately protected from creditors through the imposition of an “automatic stay.” Once the temporary stay is in place, creditors must cease collection activity during the bankruptcy case. Wage garnishment is considered a collection action, and therefore must also cease upon a Chapter 7 bankruptcy filing.
However, it’s important to note there are other payments the automatic stay doesn’t protect against – like child support. Regardless of whether you file for bankruptcy, child support payments still must be made.
Informing Your Employer
If you choose to move forward with a bankruptcy filing, the court will require a list of your creditors and addresses to notify them that you’ve filed for bankruptcy. Once notified, the responsibility to suspend wage garnishment lies with the creditor(s), and they have to make the proper arrangements with your employer to restore your paycheck to its former glory.
You are also free to send a copy of your bankruptcy filing straight to your creditor, rather than wait on the court to pass along the message. Either way, once bankruptcy filing is complete only time stands between you and a temporary stop to garnished wages.
What Happens to the Garnishment After Your Bankruptcy Case Closes?
The end of a bankruptcy case also unfortunately marks the end of the temporary stay in wage garnishment. In most bankruptcy cases, the court will discharge the debt that was subject to the wage garnishment in the first place, so creditors can no longer proceed with garnishment after a bankruptcy case concludes.
While a discharge is an important step in your bankruptcy, they’re not always guaranteed. If your case is dismissed before a discharge is authorized or the existing debt wasn’t eradicated, then creditors may continue to garnish your wages.
Consult with a Bankruptcy Attorney When Considering Bankruptcy to Stop Garnishment
Although not ideal, filing for bankruptcy to stop garnishment can offer a helpful solution to anyone who’s facing debt but can’t afford to contribute every spare dollar to creditor repayment. Not only that, but using bankruptcy to stop garnishment gives you back control over your finances so you can allocate payments that fit with your other needs.
Like with any bankruptcy consideration, there are important pros and cons to be familiar with before moving forward. If you’re considering filing for bankruptcy to stop wage garnishment, schedule a consultation with a bankruptcy attorney at CMC Law by calling 404-585-0040 or going online.
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