If you run into tough financial times, you may have trouble paying your bills or outstanding loans. If this happens, your creditors could approach your employer to garnish your wages. Suddenly you have less money to pay for other bills and could face financial ruin. Situations like these are why many people with debt problems file for bankruptcy.
Going through bankruptcy may free yourself from burdensome debt. To accomplish this, you need to stop your creditors from taking your money through wage garnishments. Bankruptcy can make this happen, though whether you can stop all of your creditors from garnishing your wages will depend on your circumstances.
The automatic stay
No matter whether you file for Chapter 7 or Chapter 13 bankruptcy, if the court approves, you can expect the court to impose an automatic stay. As The Motley Fool explains, an automatic stay stops efforts by your creditors to collect payments from you. An automatic stay can last for the duration of your bankruptcy. It can even put a halt to foreclosures or repossessions.
An automatic stay can also stop future wage garnishments. Your employer should stop taking money from your paycheck upon notification of your bankruptcy. While an automatic stay may not work against court-owed judgments like delinquent child support, past due taxes or court judgments from fraud or an accident, it can still put a stop to many other efforts to collect from you.
When creditors try to collect
Some creditors may still try to petition the court to collect from you. It depends on the creditor involved. A party that you owe unsecured debt to such as a credit card company is not likely to win an exemption from an automatic stay. But it can be a different story when it comes to secured debt. A mortgage lender or an automobile loan lender might have more success.
If a creditor has a credible case that a bankruptcy court will not discharge your debt in bankruptcy, the court might grant the creditor relief. Some people contest creditor relief by showing they possess sufficient equity in the property they are paying off to repay the outstanding amount.
Avoiding future garnishments
Discharging your debt should abolish the wage garnishments associated with them. If you complete a Chapter 13 repayment plan and pay off the debt you owe, it should likewise eliminate future wage garnishments from those creditors. Still, you should be on the lookout for liens that may provoke a wage garnishment even after your bankruptcy is complete.