Wage garnishment is a legal process that allows a creditor with a valid claim to intercept a portion of someone’s income before they receive their paycheck, thereby forcing them to make payments on a financial obligation. A garnishment is often the outcome of a debt-related lawsuit, and it can consume a significant portion of someone’s disposable income.
The money goes directly to the creditor at the same time the individual receives their paycheck, in most cases. Although wage garnishment may benefit lenders by reducing the total balance on a past-due account, losing income while already struggling financially can be a real burden on someone who owes a creditor. This loss of income can put someone in an even more precarious financial situation where all of their debts start spinning out of control. One of the most common solutions to wage garnishment involves filing for personal bankruptcy.
Does bankruptcy always eliminate wage garnishment for individuals?
When reviewing whether or not bankruptcy will resolve a wage garnishment issue, there are two factors that will play an important role. The first is whether or not the creditor already has secured an order for garnishment. Bankruptcy provides someone with an automatic stay that prevents collection activity and could therefore lead to the dismissal of a pending lawsuit that would cause a garnishment if successful.
The second has to do with the nature of the debt. Bankruptcy can also help eliminate some existing garnishments, but not all of them. The nature of the underlying debt and whether or not it is eligible for discharge will determine whether or not a successful bankruptcy filing will eliminate the wage garnishment. Garnishments for personal injury judgments and child support are likely not eligible for bankruptcy discharge, whereas garnishments related to a credit card balance or a medical debt could be.
For those who are already subject to wage garnishment or are otherwise worried about the possibility of an upcoming lawsuit, personal bankruptcy could help preserve their income from creditor claims. Learning more about the rules that apply to wage garnishment during bankruptcy could help an individual evaluate their options in a more informed way.
