Seeing a portion of your paycheck disappear every pay period can be frightening. When you are already struggling to keep up with rent or mortgage payments, car payments, utilities, groceries, and other expenses, a wage garnishment can make an already difficult financial situation even harder.
If your wages are being garnished because of a debt, you may be wondering:
Can bankruptcy stop the garnishment?
In many cases, filing for bankruptcy can trigger an automatic stay that stops most collection actions, including wage garnishments. However, bankruptcy is a serious legal decision, and whether Chapter 7 or Chapter 13 is appropriate depends on your individual financial circumstances.
Understanding your options before making a decision can help you avoid waiting until the situation becomes even more difficult.
What Is a Wage Garnishment?
A wage garnishment occurs when a creditor obtains a legal process requiring your employer to withhold part of your earnings and send that money toward a debt.
In Maryland, a creditor generally needs a judgment before it can garnish wages for a debt. Maryland Courts explains that once a judgment has been obtained, a creditor can request a writ of garnishment requiring an employer to withhold part of the debtor’s wages.
Maryland Courts also states that a creditor generally may not garnish more than 25% of your wages per pay period, subject to applicable rules and limitations.
For someone already living paycheck to paycheck, even a portion of their income can make it difficult to cover basic expenses.
And that is often when people start looking for legal help.
Can Bankruptcy Stop a Wage Garnishment?
Generally, yes. Filing bankruptcy triggers an automatic stay that stops most collection actions against you.
The U.S. Courts explains that filing Chapter 7 generally creates an automatic stay that prevents creditors from continuing many collection actions, including wage garnishments.
The same general protection applies in Chapter 13 cases. The U.S. Courts specifically states that the automatic stay generally stops creditors from initiating or continuing wage garnishments and other collection activity.
The automatic stay comes from federal bankruptcy law and generally takes effect when the bankruptcy case is filed. Federal law, however, provides exceptions to the automatic stay, so it is important not to assume that every type of garnishment or debt will automatically be treated the same way.
That distinction matters.
Your particular debt, the reason for the garnishment, and your financial circumstances should be reviewed before deciding whether bankruptcy is the right solution.
What Happens to the Garnishment After Bankruptcy Is Filed?
If the automatic stay applies to your situation, the creditor generally must stop collection activity covered by the stay.
That can provide immediate financial breathing room.
But stopping a garnishment is only one part of the bigger question:
What happens to the underlying debt?
That depends on your bankruptcy case and the type of debt involved.
Chapter 7 and Chapter 13 work differently. Chapter 7 is generally designed to provide a discharge of certain qualifying debts, while Chapter 13 involves a court-approved repayment plan.
That is why simply asking, “Can bankruptcy stop my garnishment?” is not enough.
The more important question is:
“What legal option makes sense for my overall financial situation?”
Should You Wait Until the Garnishment Gets Worse?
If a creditor is already taking money from your paycheck, waiting may not make the underlying financial problem disappear.
You may also be dealing with other debts at the same time:
- Credit cards
- Personal loans
- Medical bills
- Mortgage arrears
- Car loans
- Collection accounts
- Other judgments
A wage garnishment may be a sign that your financial problems have progressed to the point where it is worth discussing your options with a bankruptcy attorney.
That does not mean bankruptcy is automatically the right answer.
It means you should understand your legal options before making a decision that could affect your financial future.
What Should You Do If Your Wages Are Being Garnished?
First, do not ignore the situation.
Review the paperwork you received and determine what debt and judgment are connected to the garnishment. Maryland Courts also provides procedures for contesting a garnishment in appropriate circumstances.
Then, consider speaking with an attorney who handles consumer bankruptcy and debt-related matters.
A review of your circumstances can help determine whether Chapter 7, Chapter 13, another legal option, or a different approach may be appropriate.
The important thing is to understand your options before making a decision.
Talk to a Maryland Bankruptcy Attorney About Your Situation
A wage garnishment can affect your ability to pay for the things you need every month. If a creditor is already taking money from your paycheck, you do not have to try to figure out your legal options alone.
Attorney Albert Coto has 12 years of experience working with Chapter 7 and Chapter 13 cases and also has experience with payment agreements and loan modification negotiations involving creditors.
If you are dealing with a wage garnishment or overwhelming debt, contact the Law Office of Albert Coto to discuss your situation and learn what options may be available.
Call Albert Coto at (240) 233-6816 to schedule a consultation.
Do not wait until your financial situation becomes even more difficult to understand your options.