If you owe debts that you’re having trouble paying, your creditors are probably trying to collect from you using phone calls, nasty letters, and perhaps even lawsuits. If your creditor takes the next step and garnishes your wages, in many cases, filing for bankruptcy will be the quickest way to protect your paycheck.
It works because an order called the automatic stay stops your creditors from collecting their debts as soon as you file.
What Is a Garnishment?
A garnishment occurs when a creditor sends an order directing your employer to deduct funds from your paycheck. In most cases, the creditor must sue you in court and obtain a money judgment first, but not always. Some creditors—such as the Internal Revenue Service—can skip this requirement. Once started, a bankruptcy filing forces the creditor to stop a garnishment.
How Filing for Bankruptcy Stops Garnishment in Powell, Ohio
Once you file and receive a bankruptcy case number, the garnishment must stop. Filing for bankruptcy works by putting an automatic stay in place—a court order that prevents creditors from trying to collect their debt in any way. The stay stops all forms of collection, including:
· phone calls
· foreclosures, and
If you need a creditor to know about the bankruptcy in a hurry, for instance, if your home is up for a foreclosure sale, you (or your attorney) will want to notify the creditor directly. Even though the bankruptcy court will notify creditors about your case, there will be some lag time while the notice goes through the mail.
Understanding the Automatic Stay
Not only does the automatic stay gives you a break from a difficult financial situation, but it also puts your creditors on an equal footing. Once you file, the bankruptcy court takes control of your financial affairs. If money is available to disperse to your creditors, the bankruptcy trustee—the official tasked with overseeing your case—will do so according to the payment priority system outlined in bankruptcy law. This process ensures that each creditor gets the amount of funds it’s entitled to receive.
When the Automatic Stay Isn’t So Automatic
If you filed a bankruptcy case within the last year and the court dismissed it, the automatic stay will only last for 30 days. Your attorney will need to ask the court to extend the automatic stay so that it covers the entire time you’re in bankruptcy. If you have filed bankruptcy twice in the last year, the automatic stay won’t get put in place at all. Your attorney will need to ask the court for a stay order.
Bankruptcy Can Stop Garnishments for Good
If you complete your bankruptcy, you’ll (usually) get a discharge—the order that wipes out your debts—at the end of your case. The discharge stops your creditors from ever collecting on certain types of debt, such as credit cards, medical bills, and court judgments. A creditor can’t garnish your wages for a debt after it’s discharged in bankruptcy.
But not all debts can be discharged. Some debts—called nondischargeable debts—will survive a bankruptcy discharge. Examples include some taxes, student loans, and child support.
Also, once you receive your discharge, the automatic stay ends. Creditors with nondischargeable debts can start to garnish your wages again, just as if you had never filed for bankruptcy. If you have any of these types of debts, your attorney should discuss the fact that they won’t go away in bankruptcy, and what you can expect to happen after your case concludes.
Questions for Your Attorney
· Do I qualify to file for bankruptcy?
· Will a bankruptcy filing stop the wage garnishment?
· Will all of my debts be wiped out with the bankruptcy filing?