Filing for bankruptcy can be a daunting decision, especially for people facing wage garnishment. Wage garnishment occurs when a creditor obtains a court order to deduct a portion of an individual’s wages to repay a debt.
Many people wonder whether filing for bankruptcy will halt this process and provide relief from ongoing wage garnishment.
Bankruptcy’s effect on wage garnishment
When someone files for bankruptcy, an automatic stay takes effect. This temporarily halts most collection actions, including wage garnishment. This means that creditors may not continue with or initiate garnishment during the bankruptcy process. However, there are exceptions to the automatic stay. For example, certain types of debts, like child support or alimony payments, may still undergo garnishment despite the bankruptcy filing.
Chapter 7 bankruptcy vs. Chapter 13 bankruptcy
The impact of bankruptcy on wage garnishment may vary depending on the type of bankruptcy filed. In Chapter 7 bankruptcy, most unsecured debts undergo discharge. This includes those subject to wage garnishment. As a result, wage garnishment for discharged debts typically ceases. On the other hand, Chapter 13 bankruptcy involves a repayment plan that allows people to catch up on overdue payments over time. Wage garnishment may continue during a Chapter 13 bankruptcy to satisfy the repayment plan obligations.
Post-bankruptcy considerations
After completing bankruptcy proceedings, people get a fresh financial start. While wage garnishment for discharged debts should cease, it is important to monitor paychecks and ensure that creditors comply with the discharge order. Filers should also focus on rebuilding their credit and managing finances responsibly to avoid future financial difficulties.
Filing for bankruptcy can provide relief from wage garnishment by invoking an automatic stay on most collection actions. While bankruptcy offers a path to financial recovery, people should carefully consider their options before making decisions about managing debt.
