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Wage garnishment can become a devastating financial crisis and burden. It may feel impossible to dig your way out of garnishment of your wages once it has happened. Feelings of desperation and helplessness can often lead to a cycle of debt. There is hope for this situation, however. Keep reading to learn more about bankruptcy and how it can help you with a wage garnishment.
What Is A Wage Garnishment?
A wage garnishment is a legal action that can be taken against you in order to fulfill a debt. This happens in the event that a debtor takes your debt to court. If the court rules in favor of the debtor, a wage garnishment order will be issued. This court order will mandate your employer to send a portion of your paycheck directly to the debtor which you owe. This will continue until the debt is paid off.
Long Term Effects
Although this action will obviously resolve a debt when other methods have failed, it will also, unfortunately, create long-lasting financial damage for you and your family. In many cases, a wage garnishment only resolves the one debt, while creating a cycle of new debt for the individual. When wages are garnished, the individual is often left with no money to take care of day to day needs such as utility bills, groceries, and transportation. In extreme cases, an employer can even terminate your employment because of multiple wage garnishments.
Can Bankruptcy Help?
Bankruptcy is one of the few options which can provide relief from this damaging cycle. When a chapter 7 bankruptcy is filed, it will prohibit the continuation of garnishment actions. This is called an automatic stay. The one exception, however, would be garnishments which are intended for a domestic support obligation. A bankruptcy will not stop a wage garnishment for a domestic support obligation, such as child support.
Understanding an Automatic Stay
Although many people are very hesitant to discuss bankruptcy or to consider this a viable option to solve their financial problems, the truth is that bankruptcy can be a very useful tool and it can help people in extreme financial stress get their finances back on track. Bankruptcy can help you in a few different ways. One of the most important ways that bankruptcy will help you is by activating an automatic stay.
The automatic stay is a legally binding action that requires all creditors to cease collection procedures for the duration of the bankruptcy filing regardless of the type of creditor. This means that creditors, collection agencies, and even government entities must stop all calls, emails, letters, and active wage garnishment.
When you submit your bankruptcy petition, a court order will be sent out on your behalf to each of your creditors. They will be informed that you have filed for bankruptcy, and they will also be informed of their obligations to cease actions against you under the orders of this automatic stay.
Is the Automatic Stay Permanent?
The automatic stay is a temporary first step in your bankruptcy process. The automatic stay is put into place so that you will be given relief from your creditors while your bankruptcy is being filed and processed.
The bankruptcy process itself will take some time, but you can rest assured that during this time you will not be harassed by creditors and your wages will not be garnished.
The debts which are approved for discharge in your bankruptcy will be dismissed. Debts that are discharged during a bankruptcy are erased and creditors are required by law to permanently cease all collection procedures including wage garnishment.
Can I Get Back the Wages I Lost?
In some cases, individuals are able to claim their lost wages and are able to recover that money that was lost. If you file your bankruptcy within 90 days of the start of a wage garnishment, you may be able to recover the lost wages. However, it is important to note that you can only recover up to a certain amount. There is a chance you will not be able to recover all of your lost wages.
There Are Some Exceptions
You should be aware that a bankruptcy cannot stop all wage garnishment. There are exceptions. An automatic stay may not be enacted on all types of debt and there could be limitations. Some exceptions include:
- Domestic support obligations- Domestic support obligations which result in wage garnishment are protected by law. A bankruptcy will not alter these orders.
- Multiple bankruptcy filing- If you have already filed for bankruptcy in the past year and your case was dismissed, a new automatic stay will only be effective for 30 days. If you have filed for bankruptcy 2 times within the last year you will not be granted an automatic stay at all.
What to Expect After the Bankruptcy?
Once your bankruptcy is final, any and all debts which were discharged in the bankruptcy will be erased and collection actions will stop permanently. This means that wage garnishments will cease. This will provide you a clean slate on which to rebuild your finances.
Also read: Changes to Bankruptcy Laws: Will They Affect You?