When a debtor is delinquent, most creditors will attempt to collect payment of debts via telephone calls and letters before escalating to more extreme forms of collection methods. Should a debtor continue to provide payment in response to a creditor’s attempt to get payment from him, as a last resort, the creditor could go to court and get a Judgment and then follow-up with a paycheck garnishment.
What is Paycheck Garnishment?
Paycheck garnishment is a court order that requires your employer to withhold a certain amount of money from your wages and forward it directly to the creditor to repay your debt. Your employer will respond by taking the money form your pay. If they fail to do so, they can be held liable for your debt.
Can Filing For Bankruptcy Stop Paycheck Garnishment?
A debtor facing paycheck garnishment has a couple of options to choose from. The debtor may work out a payment plan of the debt to convince the creditor not to garnish his hard-earned wages. This is often difficult to accomplish. The creditors are reluctant to release a garnishment because they know it virtually guarantees they receive some money toward the debt.
The method that will always stop the garnishment is the filing of a bankruptcy. Once bankruptcy is filed, the bankruptcy court automatically puts an automatic stay on collection activities. Simply put, creditors will not be allowed to collect on your debt unless the bankruptcy is dismissed, or there is an order from the court that a particular debt is not dischargeable.
During this period of automatic stay, creditors are not permitted to garnish your wages and any garnishment started must be dismissed. If the bankruptcy proceeds normally, your receive what is called a discharge. A discharge forever discharges you of any obligation to the discharged debts.
However, there are limitations to what can be protected by the automatic stay. Priority debts such as alimony, most back taxes, most student loans, and child support cannot be discharged and are not taken care of by the automatic stay.
Once a bankruptcy is filed, the debtor must inform the Human Resources Department of his employer and the creditor’s lawyer that a bankruptcy has been filed and provide the necessary supporting documents so that wage garnishing will be promptly stopped.
All things being said, filing for bankruptcy is not to be taken lightly. It really should be a last resort. Before filing for bankruptcy, make sure you have considered all of your options. After all, it will be on your credit for ten years. Before filing for bankruptcy, get some expert advice from a bankruptcy lawyer that can help you evaluate the entire picture.