If you’re considering a bankruptcy filing, you’re probably facing mounting bills and seemingly endless calls from creditors and collection agencies. Some debtors have already reached the point where their creditors have taken legal action and garnished their wages.

When your wages are garnished, it means that your employer withholds a portion of your salary and sends it directly to the entity that needs to be paid. Garnishment can take many forms. When a creditor such as a credit card or medical office exhausts its collection efforts they can go to court to get a judgment against you for the amount that you owe. If the judge grants the judgment it may be in the form of wage garnishment, where a portion of your income is paid directly to your creditor. Wage garnishment can also be ordered for other types of debts, including for child support payments, unpaid income taxes, and student loans.

Though both of these types of wage garnishment have the same effect on your take-home pay, they are not viewed in the same way by a bankruptcy court. Where your credit card bills or the amount you owe to a doctor is a dischargeable debt, child support and income taxes are not, and therefore the two different types of garnishment are handled differently.

When you file for bankruptcy under Chapter 7, one of the first things that happen is that the court issues an automatic stay on dischargeable debts. This is an injunction against collection actions for debts, and it not only stops creditors from calling you or sending you bills but also stops wage garnishment and allows you to return to receiving your full income.

Though the Chapter 7 automatic stay puts your credit card and other dischargeable debts on hold, it does not do so for domestic support obligations. These deductions will continue to be taken. However, if your bankruptcy is filed under Chapter 13, even wage garnishments for non-dischargeable debts are stopped – but only temporarily. Under Chapter 13 your debts are not canceled. Instead, they are reorganized so that you have more time to pay them off. One way or another, you will have to pay your obligations back over the next few years.

To get a better understanding of exactly how a bankruptcy filing will apply to your circumstances, contact us today to set up a time for a consultation.

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