Using Chapter 7 to Stop Wage Garnishment
If you’ve been served with court papers stating that you are being sued from a company, or if a company has already won a court judgment against you and your wages are being garnished, you’re probably feeling scared about the decrease to your income.
The good news is that a Chapter 7 bankruptcy can stop most wage garnishments, because a bankruptcy created what’s called an “automatic stay.” This prevents most creditors from trying to collect your debt during your bankruptcy case.
In order to garnish your wages, the creditor has to go to court and win a money judgment against you. This means, if you have delinquent medical bills, credit cards, etc., those companies will sue you in court. If your debt is composed of federally-guaranteed student loans, back child support or alimony, or back taxes for the IRS, these agencies don’t have to go to court in order to garnish your wages (although they must provide you with notice).
Wage Garnishment Can Cause Financial Hardship
Usually, federal law states that no more than 25% of your disposable income can be garnished, or the amount that your income exceeds 30 times the federal minimum wage – whichever is less. However, there are different limits for student loan debts, child support and alimony, and tax debts.
The minute your Chapter 7 case is filed, the law will protect you from garnishments by imposing the automatic stay. The court will notify each creditor that you have filed for bankruptcy. However, if you want to speed the process along, you can send your creditors a copy of the bankruptcy filing and ask that they notify your employer to stop the garnishment.
If garnishments are taking up most of your paycheck, call us today at 816-842-6200 to speak with an attorney. Or you can email us and schedule your free consultation.