Can Filing for Bankruptcy Stop Wage Garnishment?
Wage garnishment occurs when a portion of your paycheck is withheld to pay off a debt. It can result from unpaid taxes, child support, or creditor lawsuits. For many, garnishment adds financial strain by reducing income needed for essential expenses. Fortunately, bankruptcy can provide relief from wage garnishment. Consult with Los Angeles wage garnishment lawyers at Wadhwani & Shanfeld to explore how filing for bankruptcy can stop wage garnishment, the processes involved, and how different types of bankruptcy can help manage your debt.
What Is Wage Garnishment?
Wage garnishment is a legal process in which a creditor can take a portion of your wages directly from your paycheck to satisfy a debt after obtaining a court judgment. This process can be initiated for various debts, including:
- Unpaid taxes: The IRS or state tax authorities can garnish wages to recover tax liabilities.
- Child support or alimony: Courts can mandate wage garnishment to ensure payments for family support obligations.
- Consumer debt: Credit card companies, medical service providers, or other creditors can seek wage garnishment for unpaid bills after obtaining a court judgment.
Typically, garnishment continues until the debt is paid off, and it can significantly impact your finances, leaving you with insufficient funds to cover living expenses. For individuals in this situation, filing for bankruptcy may offer an escape route.
How Does Bankruptcy Stop Wage Garnishment?
When you file for bankruptcy, an automatic stay is issued immediately, which halts most collection efforts against you, including wage garnishment. This automatic stay is a court order that temporarily stops creditors from pursuing legal action, including garnishing wages, repossessing property, or filing lawsuits. Here’s how the process works in different types of bankruptcy filings:
Chapter 7 Bankruptcy: Chapter 7, or “liquidation bankruptcy,” is designed to discharge unsecured debts like credit card balances, personal loans, and medical bills. Once you file for Chapter 7 bankruptcy, the automatic stay halts wage garnishment for eligible debts, and you are protected from most collection efforts. In many cases, the underlying debt that caused the garnishment is discharged by the end of the bankruptcy process, meaning you are no longer responsible for repaying that debt, and wage garnishment cease permanently.
Exceptions in Chapter 7: Not all types of debt are dischargeable under Chapter 7. For example, wage garnishments related to child support, alimony, or certain tax debts may continue, as these obligations are not wiped out in bankruptcy.
Chapter 13 Bankruptcy: Chapter 13 bankruptcy allows you to reorganize your debts and set up a repayment plan that typically lasts three to five years. Filing for Chapter 13 immediately triggers the automatic stay, which stops wage garnishment. While you won’t necessarily get the debt discharged immediately, Chapter 13 gives you time to repay your debts in a more manageable way.
In this type of bankruptcy, wage garnishment stops because you include the garnished debt in your repayment plan. As long as you stick to the plan, the garnished debt will be paid off over time, and the garnishment will not resume.
Benefits of Chapter 13: Even for debts like child support, which are not discharged in bankruptcy, Chapter 13 can help you catch up on overdue payments and prevent future garnishment as long as you follow the court-approved plan.
How Soon Does Wage Garnishment Stop After Filing?
The automatic stay goes into effect the moment you file for bankruptcy, meaning wage garnishment should stop almost immediately. Once your employer is notified of your bankruptcy filing, they must cease withholding wages for garnishment, and you will be able to take home your full paycheck.
That said, it’s important to note that it may take a few days or weeks for the bankruptcy court, your employer, and your creditors to process the paperwork and implement the stay. Acting quickly to notify your employer about your bankruptcy filing can help stop the garnishment sooner.
Reclaiming Garnished Wages in Bankruptcy
In some cases, you may be able to recover wages that were garnished before you filed for bankruptcy. If your wages were garnished within 90 days before filing for bankruptcy and the total garnished amount exceeds $600, you may be able to get that money back through the bankruptcy process.
To reclaim garnished wages, your bankruptcy attorney may need to file a motion with the court, requesting the return of those funds. While the process can be complex, it’s worth pursuing if a significant amount of wages has been garnished leading up to your bankruptcy.
When Bankruptcy Won’t Stop Garnishment
While bankruptcy provides relief for most types of wage garnishment, there are certain exceptions where the automatic stay doesn’t apply, and garnishment may continue. These include:
- Child Support and Alimony: Garnishments for family support obligations do not stop in bankruptcy. Even if you file for Chapter 7 or Chapter 13 bankruptcy, these debts must still be paid, and wage garnishment for child support or alimony will continue.
- Recent Tax Debt: While older tax debts may be discharged in bankruptcy, recent tax obligations often aren’t eligible. The IRS can continue to garnish your wages for recent unpaid taxes, even if you file for bankruptcy.
- Student Loans (Under Certain Conditions): While student loans are generally not dischargeable in bankruptcy, the automatic stay may temporarily halt garnishment. However, permanent relief is more difficult to obtain unless you can prove undue hardship.
Alternatives to Bankruptcy for Stopping Wage Garnishment
If you want to avoid bankruptcy, there are other options for stopping wage garnishment. These include:
- Negotiate with Creditors: Sometimes, creditors are willing to negotiate a payment plan or settlement to avoid the expense and effort of garnishment. Reaching out to your creditors before the garnishment starts may allow you to settle the debt under more favorable terms.
- Debt Settlement: You may be able to negotiate a lump-sum payment with your creditors to satisfy the debt, thus avoiding garnishment.
- Challenge the Garnishment: If you believe the garnishment was ordered incorrectly or violates legal protections, you can file a motion with the court to challenge the garnishment.
Contact Wadhwani & Shanfeld
Wage garnishment can place a heavy burden on individuals already struggling with debt. If you are facing garnishment and feel it’s preventing you from meeting basic financial needs, filing for bankruptcy may provide the relief you need. Both Chapter 7 and Chapter 13 bankruptcy offer ways to stop wage garnishment and regain control of your income.
If you’re considering bankruptcy as an option to stop wage garnishment, Wadhwani & Shanfeld can help. Our experienced bankruptcy attorneys will assess your financial situation, explain your options, and guide you through the bankruptcy process. Contact us today for a consultation and take the first step toward reclaiming your financial future.
Sources:
bankrate.com/personal-finance/debt/file-bankruptcy-myself-stop-garnishment/
selfhelp.courts.ca.gov/wage-garnishment
