A wage garnishment can be an embarrassing situation. It tells your employer that you have failed to meet certain debt obligations, have been sued, and a creditor has obtained a court order whereby your employer must now remit a certain amount of your wages to the creditor each pay period until your debt is satisfied.
You can avoid this embarrassment by filing either a Chapter 7 or a Chapter 13 bankruptcy petition. In either of these filings, Section 362 of the Bankruptcy Code imposes an automatic stay of all civil proceedings, including your wage garnishment, and may discharge the garnishment.
Benefits of the Automatic Stay
If you are being sued for a past debt obligation, or have already had a judgment entered against you and wage garnishment is in effect, filing for bankruptcy will immediately halt the process. In other words, the creditor cannot go on to obtain a judgment against you and the current garnishment must be released immediately once you or your attorney provides the judgment creditor with your bankruptcy details.
Any funds or wages garnished under the garnishment order after you file must be returned to you. An additional benefit is that you can also have any funds garnished before you filed returned to you if the creditor garnished $500 or more in the 90 days before you filed.
Also, a bankruptcy filing prohibits any creditor from any further contact with you. All creditor phone calls and correspondence must cease immediately or the creditor could face sanctions from the bankruptcy court.
Are All Garnishments Abolished Under Chapter 7?
Unfortunately, not all types of garnishments are stopped with a bankruptcy filing. If your wages are being garnished for federal or state taxes, the filing will not stop the garnishment except in very limited circumstances. Garnishments for child support and for divorce obligations are not abolished. If your wages are being garnished for past due student loans, you might be able to get the garnishment discharged if it is imposing a financial hardship.
Which Bankruptcy Filing is Right for Me?
This is a question that you and your bankruptcy attorney need to explore. A Chapter 7 is a liquidation of much of your debt, mainly unsecured such as credit card debt, while keeping most if not all of your possessions. A Chapter 13 is a reorganization whereby you also retain all your possessions while paying back your creditors over a 36-month or 60-month period. There are also income requirements for each type of filing.
You should be aware that if you do file for reorganization, or repayment of your debts under Chapter 13, the garnishment could resume. In any event, you will have to repay that debt under the Chapter 13 repayment plan.
For the most part, though, a bankruptcy filing will operate to discharge most wage garnishments and save you from much embarrassment with your employer and keep your paycheck intact so that you can continue to meet your other obligations.