How Chapter 13 Bankruptcy Affects Wage Garnishment

How Chapter 13 Bankruptcy Affects Wage Garnishment

March 19, 2020

When your wages are garnished, you could see around 25 percent of your take-home pay go to pay your creditors. For most people, that number is unsustainable, so they choose to file for bankruptcy instead. Bankruptcy can stop wage garnishment in Montgomery, TX and beyond—consult an attorney to find out whether filing might be a good option for you.

Stopping wage garnishments

When you file for bankruptcy, an “automatic stay” is granted. An automatic stay is like telling a pet to stay—they cease what they’re doing and wait for further instructions, or in this case, they stop garnishing your wages until or unless the court says otherwise.

Depending on the circumstances surrounding your filing, you may only be eligible for a 30-day stay, which would allow your creditors to continue the garnishment. A judge may also decide not to put the stay in place at all.

Assuming your stay is granted, your attorney will contact your employer and the creditor who is garnishing your wages with the case number and other pertinent information, so the garnishments stop immediately. In most cases, getting back previously garnished wages likely will not be worth the time or effort.

Finally, your creditors will be able to resume garnishing your wages if your debt to them was not discharged, whether that’s because the case was dismissed or it is one of the designated “non-dischargeable debts.”

Exceptions to the rule

Most garnishments will be stop during bankruptcy proceedings, with two notable exceptions. First, if you filed for Chapter 7 and your wages are being garnished for alimony or child support payments, those will continue. Furthermore, those debts will not be forgiven during the bankruptcy proceedings.

Second, although a Chapter 13 proceeding will stop all wage garnishments, your payment plan will require you to fully pay them over the designated three- to five-year payment program.

Income deduction orders

Wage garnishments are different from income deduction orders, which usually happen in Chapter 13 cases—they’re limited to domestic support and Chapter 13 cases, and aren’t subject to wage garnishment limitation rules. They can also be issued even if you’re not behind on payments.

Ultimately, the idea behind filing for bankruptcy is giving you, the consumer, the chance to pay as much of your debt as possible and to give you a fresh start. Under certain circumstances, however, your creditors may still be able to siphon off your earnings.

Consult an attorney about bankruptcy wage garnishment in Montgomery County, TX

James R. Jones, Attorney at Law has offered skilled bankruptcy representation since 1993. Our team is dedicated to guiding our clients through the bankruptcy process. We are licensed to appear in state court as well as the United States District and Bankruptcy Courts in the Southern District of Texas and the United States Court of Appeals for the 5th Circuit. If you have questions about wage garnishment and bankruptcy, we can help. Call us today for a free 30-minute consultation. We look forward to discussing your situation.

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