Wage Garnishment and Bankruptcy

May 16, 2012 by  Filed under: Bankruptcy 

If you have ever been late on your debt payments or involved in harassing credit collections, then you understand the stress associated with overwhelming debts. While not all creditors engage in pushy techniques to get their money, some can go so far as to send threatening letters or even file a lawsuit against you. When credit collections reach the court system they can become a big nuisance and even leave you with limited options. Wage garnishment is one example of a court ordered credit collection, and it can be quite devastating if you aren’t expecting it.

The Basics of the Process

Wage garnishment is the process by which creditors can take part of your paycheck, or access some of your bank funds, in order to satisfy your debt. The bad news is that creditors may be eligible to garnish up to 25 percent of your gross monthly income. However, there are very strict rules by which the garnishment process works. Not all debts are eligible for garnishment. The most common debts that can result in wage garnishment are back due child support payment, unpaid taxes, student loan debts or other unpaid court ordered fines. Also, creditors must obtain a court order before any of your wages can be garnished. This means that the burden of proof falls on the creditor to prove that they have made good faith efforts to collect on the debt before a court will approve the order.

Dealing With Wage Garnishment

While the rules governing the wage garnishment process are there to prevent you from being bombarded by unfair collections, a wage garnishment order is still tricky to manage once implemented. Since the order is a legal matter, you may find it difficult to stop or reverse the order once it has been issued. Full debt repayment is one option for stopping a wage garnishment order, but this isn’t always financially possible.

Another option for dealing with wage garnishment is filing for bankruptcy. When you file a bankruptcy petition an automatic stay order is issued, which is a legal order that prohibits creditors from collecting on a debt. This order is immediate and halts all credit collections, including garnishment orders. The benefit of the automatic stay is to freeze collections while you work out a debt resolution plan under court supervision. An automatic stay can give you the freedom from the garnishment without the worry of dealing with your creditors directly. However, debts that are not eligible for bankruptcy may not be protected from garnishment. Further, any money that has already been garnished is not likely to be returned, but future money may be protected.

The Lee Law Firms bankruptcy lawyers have many years of experience in all aspects of Chapter 7 and Chapter 13 Bankruptcy. They have extensive knowledge of bankruptcy laws and aim to provide their clients will a plan to obtain a solid financial future.

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