What is a Wage Garnishment?
Ignoring outstanding credit card debt can cause lenders to garnish your wages. Wage garnishment is any legal or equitable procedure through which some portion of a person’s earnings is required to be withheld by an employer for the payment of a debt. Most garnishments are made by court order. When you are dealing with wage garnishment laws, it is important that you hire an experienced bankruptcy lawyer to protect your rights.
How Bankruptcy Stops Wage Garnishment?
When faced with notices threatening legal action, consumers should contact a bankruptcy lawyer immediately to discuss options before the situation escalates. However, if your wages are currently being garnished or levied, you may be entitled to a fresh start by filing bankruptcy.
Wage garnishment will usually only stop if:
- your debts are settled, or
- a bankruptcy’s automatic stay stops the action.
What is an Automatic Stay?
In most cases, filing bankruptcy provides you immediate protection with the automatic stay. The automatic stay is a powerful court order that puts a quick stop to all forms of collection (including phone calls, letters and repossession) for the duration of your case. Both Chapter 13 and Chapter 7 bankruptcy can stop wage garnishment, but each can be tricky. Contact me today to discuss your specific situation during my free consultation visit.
What is Protected from Wage Garnishment?
By law, only a certain percentage of wages can be withheld, allowing some income for the employee to live on. Deductions that are legally required to be paid by the employee are also protected from wage garnishment. For example:
- Federal, state, and local taxes
- Unemployment insurance
- State employee retirement system payments
- Social Security payments
However, the automatic stay does not apply to deductions not required by law and are not protected from wage garnishment (i.e. health insurance, union dues, child support and alimony). In Arizona, 25% of your income after allowed deductions can be garnished. That can be reduced to 15% if you can show a hardship.
Wage Garnishments After Bankruptcy
The automatic stay ends when you receive a discharge or when the court lifts the stay. If 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. However, if your case gets dismissed without a discharge, then the creditor can continue the wage garnishment after dismissal.
I offer free initial consultations by phone, or in person, to help guide you toward a successful resolution of your financial problems. Call today to schedule a free consultation.