As bankruptcy is an effective means of stopping creditors from garnishing your wage, declaring it could help stop wage garnishments or recover wages already taken through garnishment immediately, although certain restrictions apply. This guide provides more insights into wage garnishment and bankruptcy issues.
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What Is Wage Garnishment? How Does It Work?
A court order may allow creditors to garnish wages as part of their debt collection efforts, deducting money directly from your paycheck to cover outstanding obligations. While wage garnishment can help pay off debt more quickly, it may also leave you vulnerable to legal actions from creditors or other drastic measures affecting your assets and finances. Although it can assist in reducing existing debts, it may also worsen financial situations by increasing financial strain or even leading individuals into default.
Additionally, tax authorities or creditors may deduct funds directly from paychecks, further complicating financial stability. Wage garnishment can put significant pressure on family finances and force debtors into difficult situations as they struggle to manage their obligations while facing aggressive collection efforts.
Financially supporting yourself and your family may become difficult without receiving your full paycheck. Relying on credit cards or loans with higher-than-usual interest rates to cover bills could put you back into the same cycle that got you here in the first place, leading to garnishments being sent against you and bankruptcy being your only viable solution.
Automatic Stay of Bankruptcy
A bankruptcy petition triggered either through Chapter 13 “adjustment” or Chapter 7 “straight bankruptcy” will trigger an “automatic stay”, preventing you from collecting additional debts (with certain priority debts being exempt). Creditors cannot collect debts after you file for bankruptcy but may petition the court in certain instances to lift this stay; such requests will typically only be approved under exceptional circumstances.
Creditors generally cannot garnish your wages unless they first win a lawsuit and obtain a judgment against you, followed by an order from a court to garnish your pay as part of collecting that judgment. Filing for bankruptcy could prevent this form of proceedings from proceeding further – without this court order from collecting their due, creditors cannot garnish your wages.
A Wage Garnishment Before Filing Bankruptcy
In some situations, the bankruptcy filing could help recover wages that were garnished and recover them within 90 days after you file for bankruptcy. Exemptions allow this recovery option; you could receive back up to $600 of what had been garnished within this time. To determine whether filing bankruptcy makes financial sense and takes into account potential attorney fees associated with filing.
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Start Stopping Wage Garnishment Immediately
Even after filing for bankruptcy immediately puts an immediate stop to collection efforts, wage garnishment may still occur due to creditors not yet receiving notification of it. Notify both your employer’s payroll office as soon as you file for bankruptcy as well as local sheriff offices which usually handle wage garnishment orders to stop immediate wage garnishments from continuing.
Before wage garnishments can occur, consumers must first be made aware. Therefore, as soon as an impending wage garnishment notification arrives action must be taken immediately in response. You will gain more from seeking professional legal help right away when facing wage garnishment proceedings.
4 Easy Steps Now to End Wage Garnishment
1. Arrange a Payment Plan or Settlement Agreement, Contact Your Debt Collector/Creditor
In some instances, debt collectors offer settlement offers at significantly discounted prices due to buying debt for pennies per dollar from original creditors who sell off debt to debt buyers like debt collectors; you could prevent wage garnishment this way as long as an arrangement can be agreed upon; typically though you will still need to settle up in one lump sum payment plan agreement is reached with each debtor/collector/collective.
Negotiating with original creditors or lenders that have obtained court orders to garnish wages may prove challenging; nevertheless, it may still be worthwhile attempting to reach out and ask. Explain your situation to them as you inquire into affordable repayment plans available from them.
2. Fighting Wage Garnishment in Court
When receiving notice of wage garnishment, instructions will also be included on how you can challenge it in court. Filing paperwork at the location where it was issued should suffice as proof of it being granted in its entirety.
Act quickly if you intend to file for exemption – depending on where you reside, there may only be five days available in which to submit a claim, and before your employer or payroll service may have no choice but to withhold part or all of your paycheck as garnishment occurs automatically.
3. A Bankruptcy Can Stop Wage Garnishment
Bankruptcy filing quickly stops wage garnishment orders because once your case has been filed the automatic stay protects you and prevents creditors from trying to collect on them, such as wage garnishment orders.
Chapter 7 bankruptcy offers you a fresh start and financial breathing room if your debts are discharged, providing both relief and a chance for renewal after repayment is finished.
The automatic stay does not stop all collection efforts; however, child support and alimony payments are exempt. Garnishment orders remain applicable even post-bankruptcy for these debts.
4. Consider Seeking Assistance From Nonprofit
If you are having difficulty keeping up with payments, sign up for free counseling sessions with a local nonprofit for advice from credit counselors on how to deal with debt collectors and develop a repayment plan that you can present directly to any banks suing you.
Summing Up!
Your options for wage garnishment vary; either by contesting the judgment itself, negotiating directly with creditors who filed orders against you, or stopping wage garnishment altogether depending on their permission. There may also be ways you can stop wage garnishment immediately that will help lower debt and improve finances in general.
Are You Considering Bankruptcy?
Tenina Law will arrange a free consultation with one our bankruptcy attorneys to discuss your situation, your goals and your options. The bankruptcy specialist may be able guide you to bankruptcy if you are interested in it. Call us today for a free consultation.
