Wage garnishment is a legal process that allows a creditor, based on a court judgment, to require your employer to divert a portion of each paycheck to satisfying the debt. Garnishment is often used by credit card companies, medical services providers, personal loan lenders and debt buyers. When part of every paycheck is taken before you ever see it, it can be an insurmountable task to keep up with mortgage payments, rent, utilities, groceries and other everyday expenses.
The good news is that filing for bankruptcy, whether in Chapter 7 or Chapter 13, generally stops wage garnishments immediately, which can help put you back in control of your finances. It can also provide you with long-term relief from debt.
The moment a bankruptcy case is filed, an automatic stay goes into effect. It requires creditors to stop most collection efforts, including wage garnishments. Once the creditor receives notice of the bankruptcy, they must halt all collection measures. The stay remains in force throughout the bankruptcy proceeding, unless lifted by court order. In a Chapter 7, that usually means the stay lasts until the debtor receives a discharge. In a Chapter 13, the stay lasts throughout the duration of the repayment plan.
A Chapter 7 bankruptcy, in addition to stopping the garnishment via the automatic stay, can eliminate the unsecured debt that led to the garnishment in the first place. Once that debt is discharged, garnishment can no longer resume. That fresh start is one of the primary reasons Chapter 7 is such an effective tool for individuals overwhelmed by debt.
Chapter 13 bankruptcy takes a different approach to resolving the debt. Instead of eliminating debts immediately, it allows you to adopt a court-approved monthly repayment plan lasting three or five years. The creditor that was garnishing your wages is typically included in that plan, which means that they are limited to a part of the structured monthly payment you make. Note that a Chapter 13 plan does not require paying all outstanding unsecured debt: only the amount you can reasonably sustain.
Not every wage garnishment can be stopped through bankruptcy. Certain obligations, such as child support and alimony garnishments, are treated differently. Even so, bankruptcy can stop many of the garnishments that can overwhelm consumers and create deep financial spirals.
Whether Chapter 7 or Chapter 13 is the better solution depends on your income, assets and financial goals, but both can offer a path out of debt and out from under garnishment.
Jeff Field & Associates, with offices conveniently located in Douglasville, Gainesville, Bogart, Lawrenceville, Marietta and Decatur, can help you stop a Georgia wage garnishment and other debt collection measures. Call us at 404-381-1278 or contact us online for a free initial consultation.