Bankruptcy and Wage Garnishment: What You Need to Know

Bankruptcy and Wage Garnishment:
What You Need to Know

Can a creditor garnish a debtor's wages?

When a debtor is delinquent, most creditors will attempt to collect payment of debts via telephone calls and letters before escalating to more extreme forms of collection methods. Should a debtor continue to provide payment in response to a creditor’s attempt to get payment from him, as a last resort, the creditor could go to court and get a Judgment and then follow‑up with a paycheck/wage garnishment.  Remember, a creditor cannot garnish your wages without a judgment, so don’t let them fool you with a telephone call threatening to garnish your wages.

What is Paycheck Garnishment?

Paycheck/wage garnishment is a court order that requires your employer to withhold a certain amount of money from your wages and forward it directly to the creditor to repay your debt. Your employer will respond by taking the money form your pay. If they fail to do so, they can be held liable for your debt.  In California, that amount is 25% of your net paycheck.

Can Filing For Bankruptcy Stop Paycheck/wage Garnishment?

A debtor facing paycheck garnishment has a couple of options to choose from. The debtor may work out a payment plan of the debt to convince the creditor not to garnish his hard‑earned wages. This is often difficult to accomplish. The creditors are reluctant to release a garnishment because they know it virtually guarantees they receive some money toward the debt.

The method that will always stop the garnishment is the filing of a bankruptcy. Once bankruptcy is filed, the bankruptcy court automatically puts an automatic stay on collection activities. Simply put, creditors will not be allowed to collect on your debt unless the bankruptcy is dismissed, or there is an order from the court that a particular debt is not dischargeable.

During this period of automatic stay, creditors are not permitted to garnish your wages and any garnishment started must be dismissed. If the bankruptcy proceeds normally, your receive what is called a discharge. A discharge forever discharges you of any obligation to the discharged debts.

However, there are limitations to what can be protected by the automatic stay. Priority debts such as alimony, most back taxes, most student loans, and child support cannot be discharged and are not taken care of by the automatic stay.

Once a bankruptcy is filed, the debtor must inform the Human Resources Department of his employer and the creditor’s lawyer that a bankruptcy has been filed and provide the necessary supporting documents so that wage garnishing will be promptly stopped.

Final Considerations

If your wages are being garnished or about to be, you should see an attorney as soon as possible.

For more information on how bankruptcy can help stop wage garnishment, contact a bankruptcy lawyer who has experience in bankruptcy law and helping clients protect their assets. The Law Office of Mark A. Reed is comprised of dedicated bankruptcy attorneys who put the client’s interests first. The experienced bankruptcy attorneys of the Law Office of Mark A. Reed will guide you through the bankruptcy process and ensure that you receive the protection you deserve.

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