Michael D. Hart, P.C.

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Can bankruptcy help you deal with a credit wage garnishment?

On Behalf of | Aug 17, 2021 | Bankruptcy |

When someone falls behind on their bills, their creditors may start taking aggressive action. Making collection calls to someone’s house, sending them warning letters and reporting missed payments to the credit bureau are all tactics that help companies push people into making payments.

However, some people don’t respond even to those aggressive efforts, possibly because they don’t have the personal assets to make a payment regardless of what the creditor does. When someone has missed multiple payments or has indicated a refusal to continue paying, their creditors might pursue a wage garnishment.

Both federal and Virginia state laws allow creditors to go to court and ask a judge to directly allocate them money from someone’s wages to force the repayment of a valid debt. Will bankruptcy potentially stop the garnishment of your wages?

Bankruptcy can affect garnishment in two different ways

When you file for bankruptcy, the courts grant you an automatic stay that temporarily stops collection activity against you. An automatic stay will mean that a pending debt-related lawsuit won’t go to court until the courts move forward with your bankruptcy filing. In other words, a timely bankruptcy filing could prevent a creditor from getting a garnishment against you.

In most cases, filing bankruptcy will also mean that the courts temporarily stop an existing garnishment. The wages that had previously gone to your creditor may go back into your pocket until the courts rule on your bankruptcy filing. In cases where the debt that resulted in the garnishment is part of your discharge, the garnishment will not continue after your discharge.

Garnishment is a serious issue that requires a careful response

While there are limitations on how much of your income can go to your creditors, if you already find yourself struggling to meet your financial obligations, losing some of your income could prove to be financially devastating. Garnishments can take a bad financial situation and make it far worse due to the loss of that disposable income.

Avoiding the garnishment of your wages or successfully stopping a garnishment to reclaim that income can help you balance your budget and maintain control over financial circumstances even if creditors have become aggressive in their attempts to collect.