If you have a wage garnishment this means a creditor has most likely gone to court, received a court order, and been awarded a percentage of your earnings each month (a court order may not be needed for certain debts such as tax debt, child support payments, or federal student loan debts). Most wage garnishments will remain in place until the loan is completely paid. Recently on our bankruptcy forum a user asked, “Can I file bankruptcy if I have a wage garnishment?”
Wage Garnishment and Bankruptcy
Debtors may file bankruptcy if their wages are currently being garnished. Unfortunately, certain wage garnishments may not be affected by the bankruptcy so it is important to first understand whether or not your wage garnishment will be stopped, and if not, whether bankruptcy is the right choice for you.
Let’s address the first question. Although you may be able to file bankruptcy if you have a wage garnishment, filing bankruptcy will not stop collection efforts for certain debt obligations because certain debts are not discharged in bankruptcy. This means that although the wage garnishment may be temporarily suspended during your bankruptcy, it will start again after the bankruptcy has completed. Debts which may not be discharged include federal student loans (exceptions exist), child support and spousal support debt, and certain federal and state tax debts.
Is filing bankruptcy a good idea with a wage garnishment?
If you have wage garnishments, even ones which will not be discharged, you still might consider filing bankruptcy. Filing Chapter 7 bankruptcy can potentially discharge other unsecured personal loans such as credit card debts, medical bills, and unsecured personal loans.
So, for example, if you had $50,000 in medical debts and a $20,000 credit card bill filing bankruptcy might still be an option, even if your wages were currently being garnished for $250 per month for child support. In this example the medical debt and credit card debt might be discharged by filing Chapter 7 bankruptcy, even if the wage garnishment would continue following the debt discharge.
Does it matter if I file Chapter 7 or Chapter 13 bankruptcy if I have a wage garnishment?
If you have wage garnishments it will not matter whether you file Chapter 7 or Chapter 13 bankruptcy. Garnishments for debts which are not discharged will continue regardless. The main consideration, however, is whether you meet the requirements to file Chapter 7 bankruptcy. For instance, are your median and disposable incomes too high to receive an immediate unsecured debt discharge through Chapter 7 bankruptcy? Another consideration is whether you have assets you wish to keep and not have liquidated.
Federal and state laws determine how much of your paycheck can be garnished and what types of creditors can garnish your paycheck. While you can file bankruptcy with a wage garnishment there are certain wage garnishments which cannot be stopped by filing bankruptcy including child support, spousal support, student loan debt, and tax debts. This does not, however, mean that you may not have other unsecured debts which could be discharged by filing Chapter 7 bankruptcy.
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