If you are having trouble paying your bills, a wage garnishment may add insult to injury. After all, you may not want your employer to know about your financial situation. You also probably do not want to lose income from every paycheck to your creditors.
Filing for Chapter 7 bankruptcy protection is a good way to temporarily stop future wage garnishments before they become reality. If your debts are dischargeable through bankruptcy, your creditors may also not be able to garnish your wages after the process concludes.
A wage garnishment is a portion of your paycheck your employer withholds to pay outstanding debts. While there are exceptions, creditors typically cannot legally garnish wages without filing a lawsuit and securing a judgement against you. Once that happens, your employer has a legal obligation to comply with the garnishment.
The automatic stay
When you file for Chapter 7 bankruptcy, you benefit from an automatic stay of collections activities. During this stay, lenders cannot usually foreclose on your home, repossess your vehicle, garnish your wages or take other action against you.
Because the stay is both immediate and automatic, filing for bankruptcy protection is often an effective strategy for keeping an anticipated garnishment from landing on your employer’s desk.
While a bankruptcy filing may stop wage garnishments, certain garnishments can likely continue. If you have failed to pay child support, for example, bankruptcy is not likely to eliminate the garnishment. The same may be true for delinquent student loans and unpaid taxes.