Wage garnishment can be a stressful and financially crippling experience. When creditors start taking money directly from your paycheck, it can feel like you’ve lost control of your finances.
Many people in this situation wonder if bankruptcy can provide relief.
This article will explore how bankruptcy affects different types of wage garnishments and how an experienced bankruptcy attorney can help you navigate this complex process.
When you file for bankruptcy, whether it’s Chapter 7 or Chapter 13, the court immediately issues an order called the “automatic stay.”
This stay halts most collection activities, including many types of wage garnishments. The automatic stay takes effect as soon as you file your bankruptcy petition, providing immediate relief in many cases.
However, it’s crucial to understand that the automatic stay’s power isn’t absolute. Some types of garnishments can continue despite bankruptcy, and creditors can sometimes petition the court to lift the stay.
Let’s explore which garnishments bankruptcy can and cannot stop.
Bankruptcy can immediately halt wage garnishments for credit card debts. These debts are typically considered unsecured and are often dischargeable in bankruptcy. Once you file, the credit card company must stop garnishing your wages and participate in the bankruptcy process like any other creditor.
Similar to credit card debts, medical bills are usually unsecured debts that can be discharged in bankruptcy. Filing for bankruptcy will stop ongoing garnishments for medical debts.
Wage garnishments for personal loans, whether from banks, online lenders, or individuals, typically stop when you file for bankruptcy. These debts are generally unsecured and dischargeable.
If a creditor has sued you and obtained a judgment, resulting in wage garnishment, bankruptcy can usually stop this. However, if the judgment is based on fraud or willful and malicious injury, it might not be dischargeable, and the garnishment could potentially continue after bankruptcy.
Bankruptcy cannot stop garnishments for child support or alimony (also called spousal support or maintenance). These debts are considered “priority debts” and are not dischargeable in bankruptcy. The automatic stay doesn’t apply to the collection of domestic support obligations.
While bankruptcy can stop garnishments for some tax debts, others may continue. Generally, income tax debts less than three years old, taxes for which you haven’t filed a return, or taxes you’ve willfully evaded aren’t dischargeable. Garnishments for these debts may continue.
In most cases, student loans are not dischargeable in bankruptcy, and garnishments for these debts may continue. However, filing for bankruptcy can temporarily stop the garnishment, giving you time to negotiate with the lender or explore other options.
Bankruptcy cannot discharge criminal fines or restitution orders. If your wages are being garnished to pay these debts, the garnishment will likely continue despite filing for bankruptcy.
Navigating the complexities of bankruptcy and wage garnishments can be challenging. An experienced bankruptcy attorney can provide invaluable assistance in several ways. They will begin by assessing your situation and reviewing your financial circumstances, including all garnishments, to determine which can be stopped by bankruptcy and which may continue.
This comprehensive evaluation helps you understand the potential outcomes of filing for bankruptcy in your specific situation.
Your attorney will guide you in choosing the right type of bankruptcy, helping you decide whether Chapter 7 or Chapter 13 is more appropriate for your circumstances. This decision can significantly impact how your debts and garnishments are handled. They will also advise on the timing of your bankruptcy filing, which can be crucial in some cases. Proper timing can maximize the benefits and potentially allow you to recover some garnished wages.
Once you decide to file, your attorney ensures that all creditors, including those garnishing your wages, are properly notified of your bankruptcy filing. This notification is crucial for enforcing the automatic stay. If a creditor continues to garnish your wages after being notified, your attorney can take action to enforce the stay and potentially recover damages for violations.
For debts that aren’t automatically stayed or discharged in bankruptcy, your attorney can negotiate with creditors to reduce or eliminate the debt, or to set up a more manageable payment plan.
They will represent your interests in bankruptcy court if creditors challenge the discharge of certain debts or seek to continue garnishments.
Your attorney will also advise you on non-dischargeable debts, like child support or recent taxes, helping you develop a strategy to manage these obligations during and after bankruptcy. In some cases, they might identify alternatives to bankruptcy that could stop garnishments and resolve your debt issues.
Throughout the process, your attorney will ensure you meet all requirements, file all necessary documents, and attend required meetings and hearings. Bankruptcy involves strict rules and deadlines, and your attorney’s expertise is crucial for compliance.
Even after your bankruptcy case is closed, your attorney can provide guidance on how to ensure creditors respect the discharge order and don’t attempt to resume garnishments illegally. For non-dischargeable debts where garnishments might resume, they can help you prepare and develop strategies to manage these ongoing obligations.
Bankruptcy can be an effective tool for stopping many types of wage garnishments, providing immediate relief through the automatic stay.
However, it’s not a universal solution. Some garnishments, particularly those for child support, certain tax debts, and student loans may continue despite bankruptcy.
Given the complexities involved, it’s crucial to work with an experienced bankruptcy attorney. They can help you understand which of your garnishments can be stopped, guide you through the bankruptcy process, and develop strategies for dealing with any garnishments that may continue.
At Blue Bee Bankruptcy, our lawyers are highly experienced in bankruptcy options. More importantly, we understand that each case we receive is unique and each client has different needs and goals. We will discuss these signs with you and decide the best route to take.
Likewise, we strive to help our clients rebuild their lives and take steps toward a better financial future through filing.
If you’re dealing with the potential of bankruptcy, give us a call. Our team will work to help you by reviewing all of the options our firm has available. We will ensure you’ll get the best possible outcome for your situation.
Get in touch today so we can start working on either halting bankruptcies or preventing them from taking place altogether!
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