If your wages are being withdrawn from your paycheck or soon will be, filing for Chapter 7 bankruptcy can stop the "wage garnishment" or "wage attachment." Bankruptcy's automatic stay prohibits most creditors from collecting during your bankruptcy case. Find out more about wage garnishment and how the Chapter 7 automatic stay will temporarily stop wage garnishment.
A wage garnishment directs your employer to deduct money from your paycheck each month to pay a creditor's debt. Most creditors can't garnish your wages without first suing you in court and getting a money judgment, so it shouldn't be a surprise. However, a few exceptions exist.
For example, the law allows wage garnishments for student loans, taxes, and child support without first receiving a money judgment. But in most cases, including credit card balances, the creditor must file a lawsuit and win.
Once the creditor has a money judgment, it can get an order to garnish your wages from the court. The sheriff or marshall forwards the order to your employer, who then holds back a portion of your wages each pay period and sends that amount to the creditor.
Federal and state laws limit the amount an employer can deduct each month. It's a good idea to talk with your local court's self-help department staff about wage garnishment laws. They could provide information about your state's specific protections and explain what you can do to object to wage garnishment.
You usually must move fast, so don't wait. You might need to file paperwork with the court within days of receiving the garnishment notice. Learn more about stopping garnishments without bankruptcy.
When you file for Chapter 7 bankruptcy, the law immediately protects you from creditors by imposing an automatic stay. The stay prohibits creditors from taking any collection activity against you during your bankruptcy case.
Because wage garnishment is a collection action, almost all wage garnishments must stop once you file for bankruptcy. There are a few exceptions to this prohibition—most notably, the automatic stay will not stop child support collections.
When you file for bankruptcy, you must provide the court with a list of your creditors and their addresses. The court will notify each creditor that you have filed for bankruptcy. The creditor must then take steps to suspend the wage garnishment. However, it can take approximately a week for a creditor to receive the bankruptcy notice—even longer for your employer to receive notice to cancel the garnishment.
To avoid unnecessarily losing money, it's standard practice for you or your attorney to notify your employer of your bankruptcy filing in writing immediately. This is often accomplished by sending the employer a fax or email that includes the bankruptcy filing date and case number. Sending a copy of the filing itself isn't necessary.
The automatic stay protection won't be as substantial if you filed and dismissed another bankruptcy during the previous year. Here are the rules:
These rules prevent serial bankruptcy filings to avoid wage garnishment indefinitely. If wrongdoing occurred during the previous bankruptcy, you might not be allowed to file another bankruptcy case for a particular amount of time.
The automatic stay ends when your bankruptcy case ends. However, if your bankruptcy "discharges" or erases the wage garnishment debt—which will happen in most situations—the creditor cannot continue the wage garnishment.
However, suppose your bankruptcy case is dismissed before receiving a discharge, or the wage garnishment debt didn't qualify for discharge. In that case, the creditor can garnish your wages once more.
A local bankruptcy lawyer will be in the best position to discuss your options for stopping a wage garnishment with or without bankruptcy.