If you are facing wage garnishment, bankruptcy may be a solution to stop your wages from being garnished and even a way to get some of them back.

Wage garnishment is the deduction of money from an individual’s income for the purpose of paying off debts that they owe. Garnishments requires a court mandated order and employers usually must give notification prior to the garnishment taking effect. Once a court order is filed by whomever the money is owed, those documents are sent to the debtor’s employer. The employer then withholds money from the employee’s paycheck, and sends this to the court. The court then forwards a check to whomever the debtor owes money.

Title III of the Consumer Credit Protection Act puts a limit on the amount that can be garnished from your pay period. The maximum amount that can be garnished in a pay period cannot exceed whichever is less: twenty five percent of the disposable income or thirty times the minimum wage subtracted from the disposable income. The length of time a garnishment lasts depends on a variety of factors such as the kind of debt and the state you live in. Typically garnishment lasts until the debt is completely paid off, although some states allow for a review after a certain period of time has passed.

There are some forms of income that are exempt from being garnished. The following are examples that usually exempt:

• Government benefits – Social Security, student aid, veterans’ benefits, etc.  cannot be collected by creditors.
• Unemployment Insurance – Creditors cannot garnish the supplemental income received upon a job loss.
• Child support and alimony – Creditors are prohibited from collecting any kind of benefits that you receive to take care of a child or spouse.
• Retirement benefits – Creditors cannot garnish current or future retirement funds, either from your bank account or from an agency provider.

Garnishment puts employers on notice of your financial situation. If you are employed and have an unpaid debt, it is better to take action before being garnished.

After you file bankruptcy, automatic stay stops all actions of creditors – including wage garnishments. A creditor must have a valid reason and go through the court to have the automatic stay lifted in order to resume collecting wages or to contact you. If a creditor does not have the automatic stay lifted and continues to contact you, they will face harsh fines and penalties from the bankruptcy court.

After you file bankruptcy if you receive a discharge, creditors cannot resume collecting wage garnishments if it that debt was included in the discharge. However, if your bankruptcy case is dismissed without a discharge, your creditor can resume wage garnishment.

To ensure that wage garnishment stops immediately upon your filing of bankruptcy, you should notify the billing or payroll department of your employer. It is also recommended that you notify the local sheriff’s office of your bankruptcy, as they often handle wage garnishments.

To immediately stop a wage garnishment, contact us for a free consultation here.