Garnishing Wages and Bankruptcy

Creditors use wage garnishment as a legal maneuver to get money owed to them. If the creditor sues the debtor and the court issues a judgment from the lawsuit, a creditor can use the judgment to legally force an employer to withhold a certain percentage from the debtor’s paycheck for debt repayment. How does bankruptcy affect wage garnishments? 

If a debtor files for bankruptcy a judge will order all collection actions to cease, this is called an automatic stay. The automatic stay, applicable to all bankruptcy filings, automatically stops lawsuits, foreclosures, utility shut-offs, evictions, repossessions, garnishments, attachments, and debt collection harassment. All creditors will have to go through a US Bankruptcy Court trustee in order to deal with their debtors. 

Wage garnishments may also be prevented without having to file for bankruptcy. This personal bankruptcy question was posted on the internet in April of 2011,“If you file Chapter 13 bankruptcy can they garnish your check? My stepson is considering Chapter 13 bankruptcy and he is about to be discharged from the Army with early retirement and disability. He thinks the slate is just wiped clean and his credit only affected for 2 years. Is he right or has he been misinformed?” 

The debtor’s stepfather in this personal bankruptcy illustration may be the one misinformed. Unlike active duty pay, military retired pay cannot be garnished for commercial debts (i.e. credit cards). Military retirement pay can, however, be garnished for alimony, child support, IRS Tax Levies, and debts owed to the government. Disability pay is another matter, but it also is exempt from garnishment for a commercial debt. The military handles an automatic stay in bankruptcy proceedings like any other employer. 

Other forms of income that cannot be garnished for commercial debt include Social Security Retirement, Social Security Disability, and Supplemental Security Income. Like military pay, this type of income can be garnished for certain tax obligations, child support, alimony, certain debt to federal agencies, but not to exceed 15% of any given monthly benefit. Federal law prevents any income from being garnished for more than 25%. 

Another form of collection similar to garnishment is called an attachment. Winning a lawsuit can also attach a judgment against a debtor’s wages. Attachments are generally not ongoing, but it is an order from the court requiring the employee’s check or asset to be attached as payment for the debt. 

Since all wages can be garnished, and since filing for bankruptcy is a federal proceeding, all employers and governments may be affected by an automatic stay. As long as the stay is executed in the bankruptcy proceedings, garnishments will cease. 

Bankruptcy laws can be complicated and you may need a bankruptcy lawyer to review your financial situation and help you decide if bankruptcy is right for you. If you need relief from the stress of debt and you live in or around the metropolitan area of Tuscan, Arizona, contact us here today at www.betterbankruptcy.com .We will help you find a bankruptcy attorney in your area who can answer your bankruptcy questions.

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