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Can bankruptcy stop wage garnishment?

On Behalf of | Jan 14, 2025 | Bankruptcy Law

When you are overwhelmed with debt you cannot pay, it is tempting to ignore it. Creditors can be relentless with their harassment and it might feel easier to just stop responding to their phone calls, letters and lawsuits.

Unfortunately, if you ignore a creditor’s lawsuit against you, they will obtain a default judgment. This is a judgment against you for the debt you owe, usually with other costs added to it, such as court costs, interest and attorney fees.

The consequences of a default judgment

After obtaining a judgment, a creditor has various options available to collect the debt. Wage garnishment is one of these options. You may suddenly find your bank accounts frozen and be unable to access your money.

Wage garnishment usually puts you in a worse position than before. You no longer have the money to put towards paying your bills and try to get out of debt.

Having your wages garnished also puts you at risk of further financial problems, such as losing your home, vehicle or being unable to pay for necessities, such as utilities and groceries.

Depending on your situation, bankruptcy could be an option to stop wage garnishment. First, when you file for bankruptcy, a mechanism called an automatic stay goes into place.

The automatic stay

An automatic stay is an order that creditors must immediately cease all collection efforts. The stay lasts at least until your bankruptcy concludes, which is often weeks or months.

The automatic stay gives you time to stop and focus on your financial situation while not worrying about losing more money in the meantime. If a creditor is garnishing your wages due to a judgment obtained against you, the automatic stay forces the garnishment to temporarily stop so you can start receiving your wages again.

Additionally, the automatic stay prohibits creditors from contacting you while the stay is in effect.

Wage garnishment still applies to some debts

Filing for bankruptcy will not stop wage garnishment in all situations. If your wages are being garnished for certain types of debt, bankruptcy will not prevent garnishment.

Examples of debts that are still subject to wage garnishment if you file for bankruptcy include child support, alimony, mortgage debt, government funded student loans and certain tax debt.

Wage garnishment from debt that is not part of your bankruptcy will resume once the automatic stay ends. Therefore, you should make sure all dischargeable debt is included in your bankruptcy.

Chapter 7 bankruptcy allows certain debts to be fully discharged. Once your bankruptcy is complete and the debt discharged, it is as if the debt is fully repaid and the creditor cannot resume wage garnishment after your bankruptcy.

Can I recover wages garnished before bankruptcy?

Generally, any wages garnished before you filed for bankruptcy are lost. However, if you meet certain criteria, you may be able to recover wages that were garnished before your bankruptcy filing.

Bankruptcy involves many steps and requirements. If it is not done properly, you lose out on discharging your debt and allow creditors to resume their pre-bankruptcy actions, such as wage garnishment.

If you are considering filing for bankruptcy to stop wage garnishment or get out from crushing debt, talk with a professional about your specific goals and the steps for reaching them.