A wage garnishment is a legal action taken by a creditor to collect a debt by taking a portion of an individual’s wages. It can be a difficult and stressful situation for those who are struggling financially. One option that may be available to those facing wage garnishment is to file for bankruptcy.
When an individual files for bankruptcy, an automatic stay is put into place. This means that all collection efforts, including wage garnishments, must stop. The automatic stay provides the individual with some breathing room and time to work out a plan to address their debts. However, this protection may not be permanent and creditors may be able to seek relief from the stay to continue with the wage garnishment.
There are two types of bankruptcy that are most commonly used to address wage garnishments: Chapter 7 and Chapter 13.
Chapter 7 bankruptcy, also known as a “liquidation” bankruptcy, allows individuals to discharge certain unsecured debts, such as credit card debt and medical bills. If the wage garnishment is for an unsecured debt, it will typically be discharged in a Chapter 7 bankruptcy. However, if the wage garnishment is for a secured debt, such as a mortgage or car loan, the creditor may still be able to repossess the property securing the debt.
Chapter 13 bankruptcy, also known as a “reorganization” bankruptcy, allows individuals to keep their property and pay their debts over a period of three to five years. In a Chapter 13 bankruptcy, the individual’s income, expenses, and assets are evaluated to determine the amount that they can afford to pay towards their debts. If the wage garnishment is for a priority debt, such as taxes or child support, it will still most likely be paid in full through the Chapter 13 plan. If the wage garnishment is for a non-priority debt, it may be paid in a reduced amount, or even discharged at the end of the plan.
While filing for bankruptcy will put a stop to most wage garnishments, it is important to note that it may not be the best option for everyone. It may also have long-term consequences, such as a negative impact on credit score. Additionally, certain debts, such as student loans, are not dischargeable in bankruptcy.
If you are facing wage garnishment, it is important to speak with an attorney who can help you understand your options and what the best course of action may be for your specific situation. They can help you determine whether filing for bankruptcy is the right choice, and can guide you through the process.
In conclusion, filing for bankruptcy can stop most wage garnishments, but it may not be the best solution for everyone. The automatic stay provision of bankruptcy usually provides temporary relief, but it is not always permanent and creditors may be able to seek relief from the stay to continue with the wage garnishment. Both Chapter 7 and Chapter 13 bankruptcies can be used to address wage garnishments but the best option depends on the individual’s specific circumstances. It is important to seek the advice of a Prattville bankruptcy lawyer who can help you understand your options and guide you through the process.