If a garnishment hits your wages, the creditor can take 25% of your take-home pay (or more, in some cases), making it difficult for you to pay other bills and cover regular living expenses. Filing a bankruptcy case will usually stop the garnishment, and it might be possible to get back some of the garnished wages, depending on the type of debt and whether you file a Chapter 7 or a Chapter 13 bankruptcy.
As soon as you file a bankruptcy case, an injunction (court order) called the automatic stay goes into effect. The stay prohibits most creditors from taking or continuing actions to collect debts.
Although the automatic stay is a powerful tool, it is not absolute, and it does not apply to all creditors or all types of debt. For instance, the stay will not stop a garnishment when:
Also, domestic support obligations aren’t forgiven (discharged) in bankruptcy. You might get a domestic support obligation creditor to suspend the garnishment voluntarily while the Chapter 7 case is pending, but most bankruptcy courts will not order it.
By contrast, a Chapter 13 case will stop all garnishments, including those for domestic support obligations. Be aware, however, that in Chapter 13 bankruptcy, you must provide for the full payment of those obligations over a three- to five-year plan. Therefore, a garnishment will stop while the Chapter 13 bankruptcy is active and you're making your plan payments.
You can learn more in Bankruptcy's Automatic Stay.
Once you finish your bankruptcy case, your creditors cannot resume garnishments on discharged debts, such as credit card balances, personal loans, and medical bills. But creditors can resume garnishments on nondischargeable debts because you’ll remain responsible for paying them.
If the court dismissed your case without a discharge, you lose the benefit of the automatic stay, and your creditors can resume their garnishments (and other collection actions) for all debt types. This rule applies to all bankruptcy chapters.
After you file your bankruptcy case, it can take the court a week or more to send the official case notification to all your creditors. In the meantime, to ensure that your garnishment stops quickly, you or your attorney should inform both your employer and the garnishment creditor by providing them the bankruptcy case number, filing date, and court location.
Once the creditor knows of the bankruptcy, the garnishment must stop—even if they haven’t received a notification of the court. Allowing the garnishment to continue will violate the automatic stay.
You might be able to get back some garnished wages if you meet these conditions:
The issue for most, however, is that most states don’t have an exemption that protects cash—or it’s minimal. Also, to recover this money, you’ll have to file a lawsuit in the bankruptcy court against your creditor. Whether that makes financial sense will depend on how much you stand to get back and how much your attorney will charge to file the lawsuit.
(To learn more about exempting property, see Bankruptcy Exemptions.)