How Bankruptcy Can Stop Wage Garnishment | What to Know

Wage garnishment is when a creditor gets a court order requiring your employer to withhold money from your paycheck to pay off a debt. Filing for bankruptcy can stop wage garnishments through an automatic stay. This immediately stops most creditors from garnishing your wages, providing relief. Bankruptcy may also discharge certain debts, eliminating the need for future garnishments on those debts. However, some debts like child support can’t be discharged and may still allow garnishment. This article explains how bankruptcy helps stop garnishments, which garnishments it stops, and what to expect during the process.

Understanding Wage Garnishment

An illustration depicting a person standing confidently while shielded from threats of wage garnishment by bankruptcy protection, contrasted with a person working at a desk facing potential garnishment.

What is Wage Garnishment?

Wage garnishment happens when a creditor gets a court order requiring your employer to withhold a portion of your wages to pay off a debt. It’s a legal way for creditors to collect money you owe them. Common reasons for wage garnishment include unpaid taxes, defaulted student loans, child support, alimony, and consumer debts like credit cards or personal loans.

The amount that can be garnished from your paycheck varies depending on the type of debt and state laws. In most cases, creditors can’t take up  to 25% of your disposable earnings For individuals earning minimum or near minimum wage, the law ensures that you are left with an amount equal to 30 times the Maryland minimum hourly wage. This is governed by the Rule 3-646 and Commercial Law Article §§ 15-601 to 15-607 of the Annotated Code of Maryland.

Types of Debts That Can Lead to Wage Garnishment

  • Consumer debts: Credit card debt, medical bills, personal loans
  • Student loans: Both federal and private student loans
  • Unpaid taxes: Federal, state, and local taxes
  • Child support and alimony: Court-ordered payments for children or former spouse
  • Court judgments: If a creditor sues you and wins a judgment

How Bankruptcy Can Stop Wage Garnishment

If you’re struggling with overwhelming debt and your wages are being garnished, filing for bankruptcy may be an option to stop the garnishment and get a fresh start. When you file for bankruptcy, an automatic stay goes into effect, which immediately stops most garnishments and debt collection efforts.

Bankruptcy can either discharge (wipe out) or reorganize your debts, depending on the type of bankruptcy you file. For example, Chapter 7 bankruptcy can eliminate credit card debt, medical bills, and other unsecured debts, while Chapter 13 bankruptcy allows you to catch up on missed payments over time.

It’s important to note that certain types of debts, such as child support, alimony, and most student loans, cannot be discharged in bankruptcy. However, filing for bankruptcy can still stop the garnishment temporarily and give you a chance to catch your breath and develop a repayment plan.

If you’re considering bankruptcy to stop wage garnishment, it’s crucial to consult with a bankruptcy attorney in your area. They can help you understand your options, determine which type of bankruptcy is right for you, and guide you through the process.

How Bankruptcy Can Stop Wage Garnishment

An illustration depicting a person standing firm and composed in the center, surrounded by chaotic forces such as grabbing hands and flying documents, representing the challenges of financial difficulties and wage garnishment.

Facing wage garnishment can be a stressful and overwhelming experience. It’s a situation where your creditors have obtained a court order to deduct a portion of your wages directly from your paycheck to repay outstanding debts. However, there is a solution that can provide relief – bankruptcy.

Automatic Stay: A Powerful Protection

When you file for bankruptcy, an automatic stay goes into effect immediately. This legal provision acts as a powerful shield, preventing creditors from continuing with any collection actions, including wage garnishments. It’s like hitting a pause button, giving you a much-needed break from the constant financial pressure.

Discharging Debts: A Fresh Start

Bankruptcy not only stops wage garnishments, but it can also discharge certain types of debts, such as credit card debt, medical bills, and personal loans. This means that you may no longer be legally obligated to repay those debts, effectively eliminating the need for wage garnishment altogether.

Chapter 7 Bankruptcy: A Clean Slate

Chapter 7 bankruptcy, also known as a “liquidation bankruptcy,” is a popular option for individuals seeking a fresh start. If the debt that led to wage garnishment is discharged through Chapter 7, the garnishment will stop permanently. It’s like wiping the slate clean and starting over financially.

Chapter 13 Bankruptcy: A Repayment Plan

In some cases, Chapter 13 bankruptcy, a “reorganization bankruptcy,” may be a better fit. With this option, you can create a repayment plan to pay off your debts over a period of three to five years. During this time, wage garnishments are stopped, and you make payments to a bankruptcy trustee, who distributes the funds to your creditors according to the court-approved plan.

Navigating the bankruptcy process can be complex, but the relief it provides from wage garnishments and overwhelming debt can be life-changing. It’s important to consult with a qualified bankruptcy attorney to understand your options and determine the best path forward based on your unique financial situation.

Limitations of Bankruptcy in Stopping Wage Garnishment

When you’re struggling with overwhelming debt, filing for bankruptcy can provide a fresh start and relief from wage garnishment. However, it’s important to understand that bankruptcy doesn’t automatically stop all wage garnishments.

Non-Dischargeable Debts and Wage Garnishment

Certain types of debts, such as child support, alimony, and some student loans, are considered non-dischargeable in bankruptcy. This means that even after you’ve completed the bankruptcy process, these debts will remain, and creditors may still be able to garnish your wages to collect on them.

Other non-dischargeable debts that may continue to be subject to wage garnishment include:

  • Some tax debts
  • Court-ordered restitution for criminal acts
  • Debts resulting from personal injuries caused by driving under the influence

Lifting the Automatic Stay

When you file for bankruptcy, an automatic stay goes into effect, temporarily preventing creditors from taking any further collection actions against you. However, in some cases, creditors can request that the bankruptcy court lift the automatic stay, allowing them to resume wage garnishment.

This may happen if the creditor can demonstrate that they have a valid claim against you and that continuing the wage garnishment would not impose an undue hardship. If the stay is lifted, the creditor can then proceed with garnishing your wages to collect on the debt.

It’s crucial to work closely with a bankruptcy attorney to understand your specific situation and the potential limitations of bankruptcy in stopping wage garnishments. They can help you navigate the process and protect your rights, ensuring that you receive the relief you’re entitled to under the bankruptcy code.

The Bankruptcy Process and Wage Garnishment

Clenched fists bound by rusty chains, symbolizing financial struggles and wage garnishment, with scattered broken chain links representing the potential relief from bankruptcy

Filing for Bankruptcy

To stop wage garnishment through bankruptcy, an individual must file a bankruptcy petition with the court. This legal process initiates an automatic stay, which immediately halts creditors from continuing to garnish wages. It’s crucial to promptly notify your employer and the creditor garnishing your wages about the bankruptcy filing.

Meeting Bankruptcy Requirements

After filing bankruptcy, the debtor must attend a meeting of creditors and complete required bankruptcy courses. These steps ensure compliance with bankruptcy laws and provide information to creditors about the case. By following the proper procedures, individuals can stop wage garnishments and gain relief from overwhelming debt.

Alternatives to Bankruptcy for Stopping Wage Garnishment

An illustration depicting strong fists breaking through chains, symbolizing overcoming debt burdens and financial constraints through bankruptcy protection measures such as stopping wage garnishment.

Negotiating with Creditors

One alternative to bankruptcy for stopping wage garnishment is to negotiate directly with your creditors. This involves contacting them and explaining your financial situation, then proposing a repayment plan that works for both parties. Many creditors are willing to work with debtors to avoid the hassle and expense of garnishment or bankruptcy.

Debt Management Plans

Another option is to enroll in a debt management plan through a credit counseling agency. These plans consolidate your debts into a single monthly payment, which the agency then distributes to your creditors. Creditors often agree to reduce or eliminate interest rates and garnishments for those enrolled in legitimate debt management plans.

Claiming Exemptions

Depending on your state’s laws, you may be able to claim certain exemptions that protect a portion of your wages from garnishment. Common exemptions include amounts for basic living expenses, child support, and certain types of income or assets.

Demonstrating Hardship

If wage garnishment would create an extreme financial hardship, you can request a hearing to plead your case before a judge. Providing evidence of your inability to maintain a minimal standard of living may result in a reduction or elimination of the garnishment order.

By exploring these alternatives and understanding your rights, you may be able to stop wage garnishment without having to file bankruptcy. However, bankruptcy remains a viable option for those overwhelmed by debt and unable to find relief through other means.

Rebuilding Credit After Bankruptcy and Wage Garnishment

An illustration depicting two fists breaking apart heavy chains, symbolizing overcoming debt and financial burdens through bankruptcy protection against wage garnishment.

Filing for bankruptcy can provide a fresh start, but it can also have a significant impact on your credit score. Fortunately, there are steps you can take to rebuild your credit after bankruptcy and wage garnishment.

Establishing New Credit

One of the most effective ways to rebuild your credit after bankruptcy is to establish new credit accounts. This can be done through secured credit cards or credit-builder loans. With a secured credit card, you’ll need to provide a refundable security deposit, which typically becomes your credit limit. Credit-builder loans are designed specifically for people looking to rebuild their credit. You’ll make payments to a lender, and the money will be held in an account and released to you once the loan is paid off.

By responsibly managing these new credit accounts and making timely payments, you’ll demonstrate your creditworthiness and gradually improve your credit score over time.

Seeking Guidance from Professionals

Rebuilding credit after bankruptcy and wage garnishment can be a complex process, and it’s often helpful to seek guidance from professionals. Consider working with a credit counselor or financial advisor who can help you create a personalized plan for improving your credit and achieving long-term financial stability.

These professionals can provide valuable insights and strategies tailored to your specific situation, ensuring that you’re taking the right steps to rebuild your credit effectively.

Remember, rebuilding credit after bankruptcy and wage garnishment takes time and discipline, but by following these steps and staying committed to responsible financial habits, you can gradually restore your creditworthiness and pave the way for a brighter financial future.

Reclaiming Your Financial Freedom: A Fresh Start After Bankruptcy

Reclaiming Your Financial Freedom: A Fresh Start After Bankruptcy

If you’re a P.G. County Maryland resident drowning in consumer debts, tax liens, or facing foreclosure, bankruptcy can be a lifeline to stop wage garnishment and provide much-needed relief. At our law firm, we understand the weight of financial struggles and are dedicated to guiding you through the bankruptcy process with compassion and expertise. Take the first step towards regaining control by scheduling a consultation with our experienced bankruptcy attorneys today. Together, we’ll explore your options and pave the way for a brighter financial future, free from the burden of overwhelming debts.

Jill Phillips
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