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Understanding Bankruptcy and How Wage Garnishment Happens

man holding open an empty wallet over his laptop


By:Mike Cibik


Dealing with debt can be one of the hardest things one has to face. While you save up every last cent to pay off your bills, you might find that your wages in your bank account are suddenly being garnished.


What do you mean by wage garnishment?


Sometimes a creditor can get access to your wages or bank account to get a debt paid. This access is granted only after he files a lawsuit against you and obtains a judgment. Once the court enters a judgment against you, you will have a fixed period of time to appeal the judgment order.


After the time period lapses, the creditor can request the court to issue a turnover order to any entity that has control over any money owed to you, mainly an employer or a bank.


There are a few creditors who gets an exception from having to attain a court order. These include government agencies such as student loans, taxes, child support. It is mandatory that they notify you of their intent before they begin the garnishment.


There is, of course, a limit to how much a creditor is allowed to garnish from your wages which is mostly up to 25% of the employee’s disposable earnings. But in cases where your income and bills are around the same amount, the slightest deficit can make a huge difference. You will be left with not enough money to pay off other debts like your mortgage, auto payments, utility bills while risking repossession.


Garnishment usually continues until the debt is paid in full with interest. Sometimes, the garnishment gets blocked because the depositor will try and prevent access by closing the account and opening a new one unknown to the creditor. Garnishment also varies by state, so it is important to have the help of a professional to figure out how much would be taken away from you.


A good Philadelphia bankruptcy attorney will be able to tell you that the best way to tackle wage garnishment is to file for bankruptcy. Understanding bankruptcy and its repercussions is an important first step.


Bankruptcy and wage garnishment


Bankruptcy is a legal proceeding involving a person or business that is unable to repay outstanding debts. Filing for bankruptcy is one of the best ways to put an end to wage garnishment. When you file for bankruptcy, an automatic stay goes into effect as soon as the court receives your petition. Automatic in the sense it does not require you to get a court hearing or order but merely filing the petition will initiate the stay.


This will prevent creditors from collecting money from your bank account. They will not be allowed to call or contact you in any way. They cannot sue you. In case they had already filed a lawsuit against you, they cannot use that judgement. Bankruptcy renders the creditors zero power over your wages.


If you had received any sort of notification that the creditor plans to garnish your wages, immediately filing for bankruptcy can stop your money from being taken away. It is crucial that you inform your creditor and employer about the bankruptcy petition. With the automatic stay in order, the creditors will have to stay put till the bankruptcy case is over.


There are some rare cases where the automatic stay gets nullified before its validity period over only there is a very valid reason. And if the debt is so large that it is still existent even after the bankruptcy period, then the automatic stay expires, and the garnishment restarts again. However, any sort of wage garnishments will stop at least temporarily by a bankruptcy filing.


Once the automatic stay goes into effect, the employer should cease taking garnished funds from your account. If he fails to do so, consult a good bankruptcy attorney about filing (or threatening to file) a motion in bankruptcy court so as to make the creditor pay for his illegal behavior. In such cases, the employer or the bank could be liable to you for damages.


The period of your automatic stay can vary. If you have filed for bankruptcy previously, then the stay will be quite short. If you had filed for bankruptcy less than a year ago, then the bankruptcy period will only be 30 days. If you had filed for bankruptcy multiple times in the previous year, then you will not receive a judgment for an automatic stay.


Domestic obligation rules such as child support or alimony payments are the only exceptions to this rule. Filing for bankruptcy will not affect the garnishment of these obligations.


At the law offices of Cibik & Cataldo P.C, we are ready to help protect you from wage garnishment, and give you the legal representation that you need.If you are concerned about your wages being garnished, talk to one of our bankruptcy lawyers at 215-735-1060.


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