Will my wage garnishments stop if I file bankruptcy?
Filing Chapter 7 or Chapter 13 bankruptcy will initiate an automatic stay which will prohibit and stop certain creditor collection actions. Wage garnishments, which allow your employer to take your wages from your paycheck before they are distributed to you, will be stopped as long as the bankruptcy is in effect (some exceptions exist for certain debts).
If the bankruptcy is completed, the creditor is barred from continuing debt collection efforts and the qualifying unsecured debts are considered discharged. If, however, you fail to complete the bankruptcy, the court does not discharge the debts, or you do not complete the Chapter 13 debt repayment plan, the creditor may restart the wage garnishment and continue their debt collection efforts.
Wage garnishments not affected by bankruptcy
Filing Chapter 7 or Chapter 13 bankruptcy will not stop collection efforts for certain debt obligations. For instance, if you have filed for divorce and have spousal or child support payments these wage garnishments will not be suspended by Chapter 7 or Chapter 13 bankruptcy. Additionally, because these are considered priority debts, they will also not be discharged by Chapter 7 or Chapter 13 bankruptcy.
How do I stop wage garnishments if I file bankruptcy?
When the Chapter 7 or Chapter 13 bankruptcy petition is submitted to the court your creditors should be notified about the bankruptcy. There are times, however, that your employer may not receive the information quickly enough to stop the wage garnishments.
Under these conditions you can take a proactive approach and notify your employer’s payroll department that you are filing bankruptcy.
Recovering garnished wages after bankruptcy-
Under certain conditions if your wages have been garnished and you have filed for bankruptcy protection you may be able to recover some of your lost wages. For instance, you may be able to recover wages garnished within the 90-day prior to your bankruptcy filing if they were over $600 in aggregate and you have sufficient exemptions. Talk to a bankruptcy lawyer and find out if it makes sense to file a complaint to recover garnished wages.
Does it matter if I file Chapter 7 or Chapter 13 bankruptcy?-
File either Chapter 7 or Chapter 13 bankruptcy will stop most wage garnishments. Whether you file Chapter 7 or Chapter 13 will depend on other factors: whether you qualify for Chapter 7, whether you have assets you wish to protect, or whether you want to keep your assets and repay a portion of your debts.
Given changes in bankruptcy laws, many debtors will have to file Chapter 13 bankruptcy because their income level is too high or they have too much disposable income and will not pass the Chapter 7 means test. If you cannot file Chapter 7 bankruptcy you may still qualify to file Chapter 13 bankruptcy, which will allow you to repay a portion of your debts.
Most debtors who file bankruptcy consult with a bankruptcy lawyer to discuss their options and determine if bankruptcy is the right solution for them. Bankruptcy has long-term financial consequences which can be serious and should be your last resort.
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