You work hard. You try to get ahead. But sometimes life gets messy and you feel like you’re just spinning your wheels. Perhaps a medical crisis, life event or just staying on top of your bills was the cause of your financial catastrophe. If part of the problem includes a wage garnishment action from one of your creditors (or, you fear garnishment is in the near future for you), please read on about how bankruptcy can change your financial situation.
What is Wage Garnishment? –
A wage garnishment occurs when a court issues an order requiring your employer to withhold a certain amount of your paycheck and send it directly to the person or institution to whom you owe money and sought the wage garnishment, until your debt is paid off. A wage garnishment is usually a post-judgment remedy and is typically the result of a creditor obtaining a monetary award against you in the form of a judgment. As in everything, here are a exceptions, for example, for student loans, taxes, and child support. There are also limits to how much can be taken from your check weekly. Generally, your employer cannot take more than 25 percent of your “disposable earnings” for garnishment, no matter how many creditors are clamoring for it. Another rule is that they cannot take more than the excess of your earnings over 30 times the federal minimum hourly wage. Wage garnishment should not take away the money you need to provide food, shelter and other basic needs to your family. After reviewing a living expenses form, the court will determine how much can be garnished from your check.
How will Bankruptcy change wage garnishments?
When you file bankruptcy, an automatic stay goes into effect that prohibits and stops most collection activities by creditors. This includes wage garnishments. The automatic stay does not apply to domestic support obligations such as child support or alimony as mentioned above. If the bankruptcy discharges the debt that was tied to that creditor, which is a distinct possibility if you are filing for Chapter 7 Bankruptcy, then the debt behind the garnishment will be wiped out. The court will notify each creditor that you have filed for bankruptcy. The creditor must then take steps to suspend the wage garnishment. If you want to speed things along, however, you can send a copy of your bankruptcy filing to the creditor yourself. As always it is a good idea to discuss with your qualified bankruptcy attorney how your case will impact wage garnishment.