Wage garnishments are they stopped by bankruptcy?

Recently on our forum a user asked, “We have a court ordered wage assignment against a debtor who recently filed for bankruptcy. We have been ordered by the debtor’s attorney to return some of the money we received. I am confused why the bankruptcy filing is affecting our wage assignment.”

How is a wage garnishment affected by bankruptcy?

Debtors who decide to file for Chapter 7 or Chapter 13 bankruptcy will have most wage garnishments stopped when the bankruptcy petition is filed and the court initiates the automatic stay. Most creditors, after they have been notified of the automatic stay, are barred from resuming their collection actions, including their wage garnishments.

It’s important to note, however, that some type of wage garnishments will not be affected by the automatic stay. For example, if the debtor has a tax lien for taxes which are due after the bankruptcy or if the lien is for taxes that they cannot discharge through bankruptcy, the wage garnishments will continue, regardless of the bankruptcy filing. Additionally, wage garnishment for other obligations such as child support or spousal support will also not be suspended by the automatic stay.

Other creditors may also have their wage garnishments temporarily stayed but then be allowed to ask the court to lift the stay. Certain creditors may be granted their request, but other creditors, such as those collecting unsecured credit card or medical debts which will be discharged in the bankruptcy, will not be allowed to resume their wage garnishment.

Can the filer get back some of the garnished wages?

Now, you mentioned that not only have you been asked to lift the wage garnishment, but the filer’s lawyer also said that some of the garnished wages needed to be returned. Without more information about the specifics of your case it’s impossible to say if this is correct, but this can occur in specific situations.

For example, garnished wages may have to be returned if they were garnished within 90 days prior to the bankruptcy filing, they were over $600 in aggregate, and the bankruptcy filer had enough bankruptcy exemptions to cover them.

What do I do if I have questions about wage garnishments?

You mentioned you had questions about the wage garnishment process and whether or not you had to stop them after bankruptcy is filed. Since you have already established contact with this filer’s lawyer it may be a good idea to contact them again to discuss this case and ensure you are meeting the requirements under federal bankruptcy laws.

What should the bankruptcy filer do to ensure garnishments are stopped?

If you are the bankruptcy filer and not the company who is garnishing the wages, you may also want to take some steps after filing bankruptcy to ensure the wage garnishments are stopped as soon as possible. For example, you can notify your employer’s payroll department that you have filed bankruptcy and the local sheriff’s office.

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Beth L. is a content writer for Better Bankruptcy. Good content and information is one of many methods we utilize to bring you the answers you need.