How can bankruptcy stop wage garnishments?

If a creditor is garnishing your wages, you may be able to stop the garnishment and even get some of your garnished wages back by filing bankruptcy.  However, certain exceptions do apply.  Read on to learn more about how bankruptcy can help you stop wage garnishments.

The Automatic Stay

When you file bankruptcy, an automatic stay goes into effect that prohibits and stops most collection activities by creditors.  This means that wage garnishments are also stopped as long as the bankruptcy stay is in effect.  If a creditor wants to resume collection efforts, it must ask the court to lift the stay. The court will lift the stay only if the creditor has a valid reason for doing so. An unsecured creditor such as a credit card company simply wishing to resume a wage garnishment is not a valid reason for the court to lift the stay.

Exceptions to The Automatic Stay

The automatic stay does not apply to domestic support obligations such as child support or alimony.  These are considered “priority debts” that are unaffected by the automatic stay and cannot be discharged by filing bankruptcy.  If your wages are being garnished to satisfy domestic support obligations, the garnishment will not stop if you file bankruptcy.

If you file a Chapter 13, you will make payments on child support or alimony with arrears through your Chapter 13 Plan. Because these are priority debts, you must repay them in a Chapter 13.

What Happens to Wage Garnishments After Bankruptcy?

The automatic stay ends when you receive a discharge, your case is dismissed without a discharge, or when the court lifts the stay.  If you receive a discharge and the underlying obligation for the wage garnishment (such as credit card debt) was included in the discharge, the creditor cannot resume the garnishment to collect the debt after bankruptcy.  If your case gets dismissed without a discharge, then the creditor can continue the wage garnishment after dismissal.

If a creditor garnishes your wages after you’ve discharged that debt in the bankruptcy, they have violated the automatic stay. This is quite rare, but does happen. If you experience this, contact our office immediately.

Can I Recover Wages Garnished Prior to Filing Bankruptcy?

If certain conditions are met, you may be able to get back some of your wages even if they were garnished before bankruptcy. For wages to be recoverable, you must have been garnished $600 or more within the 90-day period prior to filing bankruptcy. You must also have enough exemptions cover them. If you meet these requirements, you can file a complaint in your bankruptcy and ask that the creditor return the garnished wages.  If you are represented by an attorney, you will want to consider how much your attorney charges for filing the complaint and the amount of wages you’re seeking to recovery to determine whether this makes sense.

Practical Tips For Getting Garnishments Stopped Quickly

When you file bankruptcy, you are required to list all your creditors so they can be notified of the bankruptcy.  However, there is a chance that creditors may not be alerted in time to put a stop on garnishments after the case is filed.

If you want to make sure the garnishment stops immediately, you should give notice of the bankruptcy to the payroll department of your company. Also, most wage garnishments are handled by the local sheriff’s office.  So you should also notify the sheriff or other levying officer of your bankruptcy so he or she can put a stop to the garnishment immediately.

Remember that garnishments involve many moving parts – your attorney’s office, your payroll department, the creditor, the creditor’s attorney and the court in which the writ of garnishment was issued. Creditors are notified of your bankruptcy immediately, but they also have to have their attorneys file the necessary paperwork and wait for the judge in the court where the garnishment was issued to order the release. Then, it has to be sent to your payroll and your payroll has to stop the garnishment. You may be garnished several more times after your case was filed. Anything taken after the date your case was filed is recoverable in full.