If your wages are being garnished, you may be considering bankruptcy. This post will discuss how filing Chapter 7 bankruptcy can put a stop to wage garnishment.
What is Wage Garnishment?
Wage garnishment is a method by which creditors can collect on debts owed to them. In order to garnish your wages, a creditor must first get a judgment against you. This means that the creditor must sue you for nonpayment of debt and win in court. Once the court enters a judgment against you, the creditor may be able to garnish (or “attach”) your wages.
A garnishment (or attachment) means that your employer holds back some of your wages and gives them directly to the creditor that secured a judgment against you.
It is important to understand that some creditors (including the IRS) can garnish your wages without obtaining a court judgment against you.
How Much Can a Creditor Take?
If a creditor attains a judgment against you, it cannot take all of your income by garnishing your wages. There are laws at the state and federal level that govern how much a creditor can garnish from your earnings.
Federal law allows creditors to take up to 25% of your net pay. However, states are allowed to protect a greater amount of your wages.
In California, creditors can garnish the lesser of:
- 25% of your wages, or
- the amount by which your weekly disposable earnings exceed 40 times the hourly minimum wage in California (which is currently $8.00 per hour).
It is important to understand that more than one creditor can get a judgment against you and attempt to garnish your wages. However, the restrictions on how much of your earnings can be garnished will still apply. Generally, this means that creditors attempting to garnish your wages must “get in line” and be paid off one at a time.
An experienced bankruptcy attorney can help you understand how much of your wages can be garnished under the applicable laws.
Child Support, Student Loans, and Unpaid Taxes
If your debts involve past-due child support payments, student loans in default, or unpaid taxes, the government or creditor can garnish your wages without getting a judgment. These types of garnishments are treated differently than a regular judgment creditor’s garnishment when you file a Chapter 7 bankruptcy. Although garnishments arising out of child support, student loans, and/or taxes may be stopped temporarily by a Chapter 7 filing, such garnishments may not be stopped permanently.
An experienced bankruptcy attorney can help you understand whether Chapter 7 bankruptcy will stop garnishments permanently pertaining to past-due child support payments, student loans in default, or unpaid taxes.
Will Chapter 7 Bankruptcy Stop Wage Garnishment?
For debt other than those involving child support, student loans, and taxes, Chapter 7 bankruptcy will typically put a stop to wage garnishments permanently.
When you file for Chapter 7 bankruptcy, the law imposes what is known as an “automatic stay.” The automatic stay prevents creditors from attempting to collect on your debts. Thus, garnishment is prohibited and ceases immediately upon the initiation of a bankruptcy.
At the conclusion of a Chapter 7 bankruptcy, your debts that can be forgiven are discharged. This means that most or all of the debts your creditors are attempting to collect on by garnishing your wages will be forgiven, and you will no longer owe the creditors money.
If you need the garnishment of your wages to stop immediately, you may want to consider an emergency bankruptcy filing. An emergency filing will put the “automatic stay” in effect faster and can give you some extra time to get the rest of your bankruptcy paperwork in order.
If you are considering filing for bankruptcy to stop your wages from being garnished, contact an experienced bankruptcy attorney. For a free and confidential consultation with an Orange County bankruptcy attorney, call Spaulding Law Group at (714) 731-7595.
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