If a creditor is garnishing your wages, you may be able to stop the garnishment and even get some of your garnished wages back by filing bankruptcy. However, certain exceptions do apply. Read on to learn more about how bankruptcy can help you stop wage garnishments.
When you file bankruptcy, an automatic stay goes into effect that prohibits and stops most collection activities by creditors. This means that wage garnishments are also stopped as long as the bankruptcy stay is in effect. If a creditor wants to resume collection efforts, it must ask the court to lift the stay. The court will lift the stay only if the creditor has a valid reason for doing so. An unsecured creditor such as a credit card company simply wishing to resume a wage garnishment is not a valid reason for the court to lift the stay.
(To learn more, see the articles in Bankruptcy's Automatic Stay.)
The automatic stay does not apply to domestic support obligations such as child support or alimony. These are considered priority debts that are unaffected by the automatic stay and cannot be discharged by filing bankruptcy. So if your wages are being garnished to satisfy domestic support obligations, the garnishment will not stop if you file bankruptcy.
The automatic stay ends when you receive a discharge, your case is dismissed without a discharge, or when the court lifts the stay. If you receive a discharge and the underlying obligation for the wage garnishment (such as credit card debt) was included in the discharge, the creditor cannot resume the garnishment to collect the debt after bankruptcy. If your case gets dismissed without a discharge, then the creditor can continue the wage garnishment after dismissal.
If certain conditions are met, you may be able to get back some of your wages even if they were garnished before bankruptcy. You can usually get back wages garnished within the 90-day prior to your bankruptcy filing if they were over $600 in aggregate and you have enough exemptions to cover them. (To learn how exemptions work, see Bankruptcy Exemptions.)
If you meet these requirements, you can file a complaint in your bankruptcy and ask that the creditor return the garnished wages. If you are represented by an attorney, whether this makes financial sense will depend on how much your attorney will charge for filing the complaint and the amount of wages you are looking to recover.
When you file bankruptcy, you are required to list all your creditors so they can be notified of the bankruptcy. However, there is a chance that creditors may not be alerted in time to put a stop on garnishments after the case is filed.
If you want to make sure the garnishment stops immediately, you should give notice of the bankruptcy to the payroll department of your company. Also, most wage garnishments are handled by the local sheriff's office. So you should also notify the sheriff or other levying officer of your bankruptcy so he or she can put a stop to the garnishment immediately.
For more on dealing with debt collectors, check out Nolo's section Debt and Debt Collectors.