In this article, we’ll discuss the important topic of: “When Filing Bankruptcy, When Does Garnishment Stop?”
Before we begin, lets us find out what garnishment is? Also known as wage garnishment, is the process of deducing the extra amount from an employee’s paycheck to pay the employee’s debts to any 3rd party or organization. This is a legal procedure in which the court, together with the employer or, in this case, the creditor, decides to pay a certain amount from the employee’s salary to overcome the unpaid dues.
According to federal law, no employer can fire an employee not to process the garnishment payment. Garnishment payments are such that it usually clears defaulted student loans, unpaid taxes, child support payments, etc.
In this article, we are about to find out the process of stopping garnishment in bankruptcy.
When Filing Bankruptcy, When Does Garnishment Stop?
Garnishment is nothing but another type of debt collection procedure. So, when you file bankruptcy, as per the court orders, there is an automatic stay on all debt collection in most cases. In chapter 7 bankruptcy, the garnishment can stop temporarily. However, there is a limit to how much the employer can garnish each month from the employer. The debtor also can save some amount by the exemption.
When a debtor files a bankruptcy claim, the court protects the debtors put putting an immediate stay. Hence the garnishment also stops immediately after filing bankruptcy. However, there are a few exceptions to this too.
A creditor, on the other hand, can ask the court to remove the automatic stay. The court can decide whether or not to lift the stay if it falls under the categories like the creditors will suffer a massive loss until the case is closed or the creditor has already got the debt secured by a house or car.
Steps to stop wage garnishment
When you file a bankruptcy case, you will have to provide the court the list of your creditors and the amount due. The court will then send the bankruptcy notification to all the creditors.
Here the steps in details –
Filing your bankruptcy
Once you submit your petition, the wage garnishments will stop immediately. However, practically, the wage garnishment stops only when the creditors submit all the necessary documents to the employer. For instance, if you file a petition just a day before the paycheck for this particular month, the garnishment will continue, as the payroll must have started. You will get the amount back.
Talk to the creditors and their attorneys
The next step is to inform the creditor and their attorney. However, they must already be notified by the court about your bankruptcy. You can talk to them and tell them about the case number. Now it will be your creditor’s responsibility to speak with your employer to stop the garnishment on priority. Make sure you have all the details handy before you make that call.
Inform the Sheriff office
It will be a good idea to keep the sheriff’s office informed if your wage garnishment involves them. You can also share with them all the details of your bankruptcy.
Inform the Employer/Payroll office
Your Employer will demand a letter from either the court, the creditor, or the sheriff department to stop the garnishment. You will have to understand that the employers are working as per the orders of the state court. So only an official statement will stop the garnishment process.
This will prevent them from going afoul against the state. But this also means that you will have to continually remind the stakeholders that are the creditor attorney and the employer to stop the garnishment urgently before the next pay cycle.
How long does it take to get garnished wages back?
There can be two scenarios of getting back the garnished wages. One is pre-petition garnishment, and the other is post-petition garnishment. In pre-petition garnishment, in a few cases, you may or may not be able to get back some of your garnished wages. If you have an exemption, you may be entitled to get some of your money back under the condition that you have filed the bankruptcy after 90 days of your garnishment.
If you have already filed a case of bankruptcy and informed the creditor, attorney, employer, and despite that, your paycheck is still getting garnished, then you need to look deeper. At times it can be bad timing. For instance, if you have filed the case just a day before a paycheck for that particular month, the wage can be garnished as the process of payroll must have already started. You can inform the creditor, asking to file a refund. And even after all this, the employer is still garnishing your wages, and you can notify the court of not following the order of automatic stay. This means that the court can sue them for contempt of court.
The creditors usually take up to 90 days to refund the garnished amount.
Going through the garnishment of wages is tough. It can be challenging to live with garnishment and have a decent standard of living. You will not be allowed any loan during this period. You can get temporary relief by filing a case of bankruptcy. It gives you an option to start new and fresh.
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