It can be difficult to make ends meet when a creditor uses wage garnishment to collect a debt. When a debtor’s wages are garnished, he or she typically loses around 25% of his or her take-home pay. This is a significant amount of money for many people. Luckily, there is a way to stop many types of wage garnishments: bankruptcy. In this article, we discuss the effect that bankruptcy has on wage garnishment.
The Automatic Stay
When you file for bankruptcy, the court issues an automatic stay. This is an order that forbids creditors from taking or continuing actions to collect debts—this includes wage garnishments. So, even before your bankruptcy is finalized, your wage garnishment will stop (at least temporarily).
Bankruptcy Doesn’t Always Stop Wage Garnishment
Although the automatic stay can stop wage garnishment, it doesn’t apply to all creditors and all types of debt. For example, an automatic stay in a chapter 7 bankruptcy case won’t stop a wage garnishment for a domestic support obligation, such as child support.
An automatic stay in a chapter 13 bankruptcy case, however, stops all wage garnishments, even those for domestic support obligations.
Stopping a Wage Garnishment
After you file for bankruptcy, it can take a little time for the court to send the official case notification to all your creditors. Therefore, to ensure that your garnishment stops quickly, you or your bankruptcy attorney should inform your employer and garnishment creditor of the automatic stay.
Recovering Garnished Wages
Although you may be able to recover some garnished wages, trying to do so usually isn’t worth the cost. It’s usually a better idea to avoid a loss by simply filing for bankruptcy quickly.
However, in order to recover garnished wages, the garnishment must have occurred during the 90 days prior to the bankruptcy filing date, it must exceed a specific amount, and you’ll need to be able to protect that amount with an exemption.
After your bankruptcy case, your creditors may not resume wage garnishments on discharged debts. However, since you’ll remain responsible for paying them, creditors are allowed to resume garnishments on debts that aren’t dischargeable. If the court dismisses your bankruptcy case without discharging your debts, your creditors can resume wage garnishments for all debt types.
Contact Our Experienced Chicago Bankruptcy Attorneys
If you’re considering filing for bankruptcy in Chicago, Illinois, you need an experienced Chicago bankruptcy attorney in your corner. At Chicago Bankruptcy Clinic, our experienced and knowledgeable Chicago bankruptcy attorneys will handle all the details of your Chicago bankruptcy case, ensuring that no important details are overlooked. When you come to us for help, you can rest assured that we’ll do everything in our power to achieve a positive outcome in your bankruptcy case. Please contact us today to schedule a consultation with one of our talented Chicago bankruptcy attorneys.