Does a Bankruptcy Filing Help with Wage Garnishment?
There are some advantages in filing for bankruptcy, and wage garnishments suspension plus the possibility of their permanent cessation are good reasons to apply. With several types of bankruptcy chapters and some alternatives to consider before filing, professional legal advice is recommended.
The first things that happen after filingChapter 7 bankruptcy is the first and best option for almost any case, and if declared eligible, creditor collection activities are stopped by the automatic stay which is put in place. Wage garnishments except for most student loans, criminal fines and restitution, child support, or other types of federal taxes such as back taxes will be suspended and prohibited while the bankruptcy stay is active.
What is wage garnishment?Usually, debtors don't think they'll have trouble making payments, but a garnishment can sometimes hit their wages. Garnishment is a legal remedy authorized by a court and should be considered a collection tool of last resort. In most states, the garnishment process can only be initiated by court order and only if a judgment for money owed has been entered. The primary interest of the creditor is to recover the debt.
The process is significant and requires a lot of legal procedures, from the formal notice until the executory title; the money judgment will be then forwarded to the employer who will take the measure of wage-assignment against the employee to recover the latter's debt. Part of an employee's money is transferred to the creditor's account as previously settled in the reaffirmation agreement.
The power of an automatic stayIn some cases, the law protects the debtor by instilling the automatic stay which imposes upon the creditors the obligation of suspending the collection efforts, according to the bankruptcy petition filed before. The automatic stay begins immediately after the petition is filed, protecting the debtor against most creditors' actions. The court requires, however, that the debtor provide them with his or her creditors' names and addresses, to notify them.
If certain conditions are met, recently garnished wages can even be repaid, if the debtor's attorney petitions the court in time.
However, the law does not always offer the debtor protection. The automatic stay's effects are applicable only to specific actions regarding properties belongings of the bankruptcy estate or those which are exempted according to the law. The protection granted this way is not always permanent, but temporary. The same happens with certain debts that can be discharged: medical bills when, for example, a person was seriously injured and had to be taken to the hospital; the lack of funds when trying to honor a check; penalties and others taxes as the law imposed them.
Can creditors fight the automatic stay?After the creditors receive the court's notification of the debtor's bankruptcy filing, they are obligated to take immediate action towards suspending all wage garnishments.
To speed up the suspension of the garnishments, it's advised that the debtor gets involved in making sure that all parties are notified of the filing (including the payroll department if necessary). Such measures are best taken by an attorney, especially since the sheriff's office is also concerned, and the usual process takes a while.
Creditors can and will probably try to fight, but bankruptcy courts almost always deny actions to lift the stay, especially from unsecured creditors.
What happens when the automatic stay ends?When bankruptcy case comes to an end, the automatic stay stops as well. Wage garnishments do not usually resume since bankruptcy cases often end with legally writing off the debt representing the subject of the garnishment. This writing off is called a discharge.
In the event of repeat bankruptcy filings during the same year, garnishments can continue. Moreover, some particularities can make the automatic stay last only 30 days or not even kick in. Even in such cases, options such as filing motions asking the court for the stay to be imposed or prolonged do exist and are best carried on by an attorney.
Benefiting from an automatic bankruptcy stay and stopping wage garnishments is truly advantageous and sometimes necessary. Remember, however, that there are consequences when filing for bankruptcy, as well as many specifics to pay attention to.
As with all legal proceedings, complications can occur at every step of the way, so consulting and employing a professional is the best course of action.