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Friday, January 11, 2013

Filing Bankruptcy Can Stop Your Wage Garnishments

 

Garnished wages are something no one wants to deal with, especially when a too-tight budget makes living paycheck to paycheck a common occurrence.  However, if you find yourself in this situation, it is important to know that filing bankruptcy stops all garnishments except domestic support obligations such as child support and alimony..

When a banruptcy is filed, an automatic stay is created. An automatic stay is a term that is used in bankruptcy to denote an automatic stop to all garnishments and collection efforts when the bankruptcy is filed.  A creditor can petition the court to allow them to resume collection efforts after an automatic stay has been placed, but must have a valid reason for submitting this request.  In most cases, the court will not allow collection efforts to resume.  Exceptions to this, however, are domestic support obligations such as child support and alimony.

The automatic stay is officially over when the bankruptcy is discharged or dismissed.  In a discharge, the creditor to whom you owed the money will likely be included in the discharge, so the garnishment will not continue. 

If your wages were garnished prior to filing bankruptcy, there are ways that you and ensure the garnishment stops as quickly as possible.  First, you should give a written notice of the bankruptcy filing to the payroll department of the company for which you work.  If the wage garnishment was handled by the local sheriff’s office, you should notify that office, as well. 

In some cases, you might qualify for a return of the garnished wages.  To qualify for this, the garnished wages must have been over $600 and you must have had enough exemptions applied in your bankruptcy to cover the amount.  This must occur within 90 days of your bankruptcy filing.  As tough as your current situation may be, imagine if you suddenly received 25% less!  That’s what a garnishment can do and the most effective way to stop it is to file a bankruptcy


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