Suddenly losing a portion of your hard earned paycheck undoubtedly creates a stressful situation. When a debt is owed and, as a result, has gone into collections, the debt collector may choose wage garnishment as a way to guarantee that the debt is paid. Most people experiencing wage garnishment are not in a financial position to forfeit part of their paycheck and may struggle to pay living expenses.
Title III of the US Consumer Credit Protection Act stipulates that in most cases, debt collectors may garnish up to 25% of your check. In the case of past due child support, that percentage may be higher in some instances. A staggering 7.2% of employees in the US workforce have had their wages garnished at one point.
Can Filing For Bankruptcy Stop Wage Garnishment?
In many cases, filing for bankruptcy may stop your wages from being garnished, but not under every circumstance. Filing for bankruptcy will put an automatic stay into effect mandating that all collections activities against you, including wage garnishments, be immediately put on hold. In some cases, you may even be eligible to receive a refund of some of the money that has been garnished in the months leading up to your bankruptcy. Filing for bankruptcy is a complex decision and should always involve the professional consult of an attorney. There are some types of debt that are not automatically included in a bankruptcy and will not be discharged in a Chapter 7 nor Chapter 13 filing. These include:
- Student Loans- The Brunner hardship test may be applied in some instances for the purpose of including student loans in a bankruptcy. The BAPCPA exemption may cover loans that are used “solely to pay qualified higher education expenses.”
- Unpaid Child Support– In most bankruptcy filings, domestic obligations, such as child support are considered a priority. Unpaid child support is not discharged under any circumstances; however, payment schedules may be developed through a Chapter 13 filing. Child support obligations must be current prior to the Chapter 13 plan being confirmed. For more information about child support see our previous blog here.
What Types of Debts Will be Discharged to Prevent Further Garnishment?
Both Chapter 7 and Chapter 13 bankruptcy filings will help to prevent garnishment from credit card, personal loan, medical bill and most other types of unsecured debts. Even some types of unpaid tax debt can be discharged in Chapter 7 or a Chapter 13 bankruptcy, provided that the criteria for discharge is met. If your wages are being garnished for any of these types of debts, the automatic stay will stop the garnishment and the bankruptcy plan will ensure that they do not restart. In addition, if one creditor has garnished over $600 in the 90 days leading up to your bankruptcy, that money may be refunded as part of a bankruptcy filing.
Never ignore past due debt, collection efforts or legal judgments. The best way to deal with wage garnishment is to prevent it; however, if you find yourself in the precarious position of having your wages garnished, contact an attorney right away.