Can You File Bankruptcy to Stop Wage Garnishments?
Often when I talk to people about bankruptcy, people look at filing for bankruptcy as an option of last resort. People often call about filing for bankruptcy when there are things like foreclosure or a repossession. Can you file bankruptcy to stop wage garnishments?
What is a wage garnishment?
Before getting to whether you can file bankruptcy to stop wage garnishments, it is important to look at what is a wage garnishment. The process will differ from state to state, so we’ll explore it from my experience here in New York.
To be able to start a wage garnishment, there has to have been some kind of lawsuit. If we are talking about a credit card, usually the person has missed payments and fallen behind on their account. As a result, the credit card issuer will say the person is in default of the credit card agreement.
After sending default notices and phone calls, if the person doesn’t bring the account current, eventually the credit card issuer will sue the person for the amount due. Maybe the person appears in court and defends the case, maybe they don’t. For purposes of this article, let’s assume that the credit card issuer wins in court. They are awarded a money judgment for the amount they are suing for.
A money judgment is what gives a creditor the right to start enforcement against a person’s assets. Here in NYC, once a creditor has a money judgment, they will send the judgment to a marshal or sheriff for execution. If the creditor has information about where you work, they can direct the marshal or sheriff to start a wage garnishment.
A wage garnishment is a deduction of your wages to satisfy a money judgment. Although there are conditions to the rule, the law here in NY provides that up to ten percent of your wages. Further, it’s up to you, the debtor, to prove any exemptions or conditions that should reduce the amount garnished.
Can you file bankruptcy to stop wage garnishments?
Fortunately, you can file bankruptcy to stop wage garnishments. Stopping wage garnishments is likely one of the biggest reasons why people decide to file for bankruptcy.
When someone files for bankruptcy, they inure the benefit of the automatic stay. The Automatic Stay, which is found in Section 362 of the Bankruptcy Code, states that upon filing bankruptcy, there is an order for relief that goes into effect automatically that stops:
- (2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;
- (3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.
Fortunately, wage garnishments fall squarely within this definition.
One strategy that I always try to undertake, and that you should undertake if you file bankruptcy to stop wage garnishments, is to include the marshal or the sheriff handling the wage garnishment for notice purposes. The faster the marshal or sheriff receives notice of a bankruptcy filing, the faster they will halt the garnishment. While it is the responsibility of a creditor to stop enforcement of a wage garnishment if a bankruptcy is filed, that may take some time, and this is a strategy to have the wage garnishment stopped sooner.
Wage garnishments are a tool that creditors use to enforce and satisfy money judgments that they obtain. Unfortunately, wage garnishments can do a lot of damage to people, especially if you live paycheck to paycheck. Filing for bankruptcy can stop wage garnishments.
If you would like to learn more about filing for bankruptcy to stop wage garnishments, or if you’re looking to file bankruptcy, contact the Law Office of Richard Kistnen today using the contact info below.