Can Bankruptcy Protect Against Wage Garnishment?
Wage garnishment—or wage attachment as it's sometimes known—can be a scary development; the idea that some organization can seize large portions of a hard-earned paycheck and leave the earner's household living on a percentage of his or her former wages can be distressing. While bankruptcy can't always stop garnishment events from taking place, in some cases, it can provide some relief.
A Chapter 7 bankruptcy, when filed, will activate what's known as an automatic stay, which prevents most attempts at engaging in collection actions, with some limits. Generally these exceptions are only made by the court itself, so if the court keeps the automatic stay in place, it will remain in place for the duration of the filing.
Generally, wages can't be garnished without the creditor suing the debtor in court, and getting a judgment. Some exceptions to this are on hand, generally for child support payments, student loan payments, or taxes owed. So when it comes to a question of who can garnish, it's commonly just about any creditor, but not without a court case. There are also limits to just how much can be garnished from a paycheck, and there are even some potential exemptions that can be used to further limit that amount. When the debtor files a list of loans and debts with the court, the court then notifies creditors about the bankruptcy filing. From there, the creditor must take necessary steps to stop the wage garnishment. It's even possible for a debtor to send the creditor directly a copy of the bankruptcy filing to ensure the greatest haste in lifting a garnishment. Some states won't allow wage garnishment to begin with, but some creditors will still make the attempt. Those whose payroll accounts are drawn on a different state may instead try to work according to that state's rules, and even if wages are safe from garnishment, the bank account may be the next target.
Once the bankruptcy case ends, so too does the automatic stay. However, once the stay concludes, the bankruptcy might well have discharged the debt that was the reason for the wage garnishment in the first place. That makes the garnishment a largely moot point, and thereby removed. That's not the case if the debt related to the garnishment is still in force, which it might be for things like child support payments, for certain court and legal costs, and others.
Moreover, it's actually possible in some cases to recover wages that were taken in a garnishment. Generally, if the wages garnished reached a combined total of over $600, and were garnished in a 90 day period prior to filing for bankruptcy. This also assumes there are sufficient exemptions to cover the total wages involved. It's generally best to consult an attorney here, who will know the exemptions available and whether or not it makes sense to pursue the garnished wages.
It's important to know one's rights under the law, and understand the provisions of a bankruptcy filing. This can be a big help in terms of getting one's credit under control, and with the help of a qualified attorney, a bankruptcy filing can be a big help in getting life back on the right track.