Will Bankruptcy Stop Garnishment?

Reasons to File for Bankruptcy

• There are many reasons to file for bankruptcy. One of those reasons is to stop wage garnishment. Every person needs a certain amount of money to live off, and honest but unfortunate debtors may need a chance to start fresh. Loss of income, injury and medical problems are very common causes of bankruptcy.
  
  

The Automatic Stay in Bankruptcy

• The automatic stay is a form of protection for debtors who file for bankruptcy. As soon as the case is filed, it means there can be no attempts to collect debts on the part of creditors. These include filing lawsuits, making phone calls, foreclosing on property and wage garnishment.
  
  

Non-Bankruptcy Limitations on Garnishment

• There are limitations on the amount of garnishment that can be taken out of your weekly paycheck. Creditors can only take up to 25 percent out of your paycheck or 50 percent for child support and alimony.
  
  

Garnishment and State Law

• The rules for garnishment are different across state lines. Some laws regarding garnishment, such as the Fair Labor Standards Act (FLSA) and the bankruptcy code, apply in all states. There are several websites, such as Fair Debt Collection.com, that provide some information on individual states.
  
  

Types of Garnishment That Will Not Be Stopped

• There are certain types of wage garnishment the automatic stay of bankruptcy will not stop. These include child support and alimony. Even in bankruptcy, an establishing order may be used to establish the amount of child support or alimony, and collection of spousal and child support may continue. However, since in a Chapter 13 case the income of the debtor earned after the case is filed will be part of the bankruptcy estate, there may be a temporary break in the collection of child support and alimony. The money will ultimately be collectible because the debts will not be discharged.
  
  

Considerations

• Not only can garnishment be stopped temporarily by the automatic stay, it may also be halted permanently by the discharge. The discharge occurs at the close of a bankruptcy case and permanently eliminates the ability of the existing debts to be collected.