For many consumers, understanding wage garnishments and their implications is important. This knowledge is always important, but it can become particularly pressing when someone is considering bankruptcy as a potential solution to halt garnishments.
Wage garnishment is a legal procedure where an employer withholds a portion of an employee’s earnings to pay a debt. This process is typically initiated after a creditor obtains a court order for various debts, including child support, student loans, taxes and/or other consumer debts.
Limits on wage garnishment
The garnishment process begins with a court judgment, after which the employer is legally obligated to withhold a portion of your earnings and send it directly to the creditor. Federal and state laws limit how much of someone’s wages can be garnished.
These limits are designed to ensure that workers have sufficient income left to meet basic living expenses. The amount that can be garnished depends on the type of debt and an individual’s disposable earnings, with specific protections in place to prevent excessive garnishment.
Bankruptcy as a solution
Filing for bankruptcy can be a viable solution to stop wage garnishments. If you file for bankruptcy, an automatic stay immediately goes into effect. This stay is a legal order that halts most creditors from continuing with collection actions, including wage garnishment. This can provide immediate financial relief and is often a key reason individuals opt for bankruptcy. Although, it is worth noting that child support, spousal support and some tax garnishments aren’t usually halted due to a bankruptcy filing.
Types of bankruptcy and wage garnishments
Chapter 7 bankruptcy can lead to the discharge of many debts, potentially including those for which your wages are being garnished. Chapter 13 involves a repayment plan, which may also address the debts causing a garnishment. Understanding which type of bankruptcy best suits your situation is essential before moving forward.
Dealing with wage garnishments and considering bankruptcy are significant financial decisions. It’s advisable to consult with someone who can explain your options and potential implications of each, given what’s at stake.
