Wage Garnishment and Bankruptcy
Wage garnishment can make an already difficult financial situation even harder by reducing the income available for housing, utilities, food, and other necessary expenses. If a creditor is garnishing your wages, bankruptcy may provide an option for addressing certain debts and collection actions.
A bankruptcy attorney in Chicago can help you understand how Chapter 7 or Chapter 13 bankruptcy may affect wage garnishment and your other financial obligations.
Can Bankruptcy Stop Wage Garnishment?
When a bankruptcy case is filed, an automatic stay generally takes effect. The automatic stay prevents many creditors from continuing certain collection activities while the bankruptcy case is pending.
Depending on the circumstances, this may stop or temporarily suspend wage garnishments related to qualifying debts.
However, the automatic stay does not apply to every type of garnishment or financial obligation. Certain payments, including some domestic support obligations, may be treated differently.
Chapter 7 Bankruptcy and Wage Garnishment
Chapter 7 bankruptcy may allow qualifying individuals to discharge certain unsecured debts that resulted in collection actions or wage garnishment.
These may include qualifying:
- Credit card debts
- Medical bills
- Personal loans
- Collection accounts
- Certain judgments
If the underlying debt is discharged, the creditor generally cannot resume collection of that discharged debt after the bankruptcy case is completed.
Chapter 13 Bankruptcy and Wage Garnishment
Chapter 13 bankruptcy generally allows eligible individuals with regular income to reorganize certain debts through a court-approved repayment plan.
Filing Chapter 13 may stop qualifying wage garnishments while debts are addressed through the repayment plan. The amount and treatment of each debt depend on the circumstances of the bankruptcy case.
When to Consider Bankruptcy
It may be worth exploring bankruptcy if wage garnishment is making it difficult to pay ordinary living expenses or if you are also struggling with:
- Credit card balances
- Medical bills
- Collection lawsuits
- Personal loans
- Past-due mortgage payments
- Foreclosure concerns
- Multiple collection accounts
- Other overwhelming debts
Bankruptcy is not appropriate for everyone, and the effect on a particular wage garnishment depends on the type of debt and your individual circumstances.
Explore Your Wage Garnishment Options
If your wages are being garnished and your debts have become difficult to manage, learning about bankruptcy may help you understand your options.
Consider speaking with a Chicago bankruptcy attorney about Chapter 7, Chapter 13, the automatic stay, and how bankruptcy may affect wage garnishment and your overall financial situation.
