Will Bankruptcy Stop Wage Garnishment?
Quick answer: Yes, filing for bankruptcy stops wage garnishment in most cases. The moment a bankruptcy case is filed, an “automatic stay” takes effect, halting all collection efforts, including wage garnishments. Exceptions apply to nondischargeable debts like child support and alimony.
Losing a portion of your paycheck to wage garnishment is stressful. For many people, it can make an already difficult financial situation feel impossible to manage. If you’re dealing with garnished wages, you may be wondering whether bankruptcy can stop it, and the short answer is: yes, in most cases it can.
Here’s what you need to know from the bankruptcy law firm, the Law Office of Michael Schwartz.
What Is Wage Garnishment and What Causes It?
Wage garnishment occurs when a court orders your employer to deduct a portion of your earnings to repay a debt. The cause of wage garnishment typically includes unpaid credit card bills, medical debt, personal loans, child support, tax debt, and federal student loans.
Once a garnishment order is in place, your employer is legally required to comply. The result is a reduced paycheck, often at the worst possible time.
It’s worth noting that Pennsylvania law limits garnishment more than most states. In Pennsylvania, wage garnishment is generally only permitted for child support, federal student loans, tax debt, court-ordered fines, and landlord judgments arising from a lease. However, if a judgment is entered against you in another state where you also work, that state’s garnishment rules may still apply. However, in Pennsylvania, while there are limitations on garnishing paychecks, once your wages are deposited into a bank account, that account may be garnished.
How Does Bankruptcy Stop Wage Garnishment?
The moment you file for bankruptcy, something called the “automatic stay” goes into effect. This provision of federal bankruptcy law immediately halts nearly all collection activity, including wage garnishments, lawsuits, collection calls, and letters.
Your creditors cannot continue garnishing your wages while the automatic stay is active, and they cannot seek new garnishment orders against you.
Acting quickly matters. If you receive a notice that your wages are about to be garnished, contacting a bankruptcy attorney right away may help you prevent wage garnishment before it begins. If garnishment has already started, filing promptly and providing your employer with a copy of your bankruptcy docket report can stop it.
What Are the Limitations of the Automatic Stay?
The automatic stay is not unlimited. Congress placed restrictions on it to prevent misuse of the bankruptcy process.
If you filed a bankruptcy case within the previous year, the automatic stay only lasts 30 days, unless you can show the court that your filing is made in good faith. The stay can then be extended for the length of the bankruptcy case. If you filed two or more cases within the prior year, there is no automatic stay at all. In that situation, you must appear before a bankruptcy judge and demonstrate why the stay should be imposed.
Which Debts Are Exempt From Discharge?
Bankruptcy can eliminate many types of debt, but not all of them. Nondischargeable debts include:
- Child support and alimony
- Most federal student loans
- Certain income taxes
- Government fines and fees
If the wage garnishment was tied to one of these debts, it may resume once your bankruptcy case closes and the automatic stay is lifted. For dischargeable debts, like credit cards and medical bills, the garnishment stops permanently.
Can You Get Garnished Wages Refunded?
In some cases, yes. Bankruptcy courts treat wages garnished shortly before a filing as “preferential treatment” of one creditor over others. You or the bankruptcy trustee may be able to recover those funds if:
- The garnishment occurred within 90 days of your bankruptcy filing
- The garnished wages would otherwise be exempt under bankruptcy law
- The creditor received at least $600
- You listed those wages as exempt in your bankruptcy petition
In the case of a preference, these garnished wages would become property of the bankruptcy estate and will be redistributed to all creditors by the bankruptcy trustee. This process can take several months, so patience is important.
What Happens If a Creditor Ignores the Discharge Order?
Once a debt is discharged in bankruptcy, creditors are legally prohibited from resuming wage garnishment on that debt. If a creditor violates the discharge order, they can face court sanctions. Federal bankruptcy law provides real protections here, and a bankruptcy attorney can help you take action if a creditor crosses that line.
Get Help From the Law Office of Michael Schwartz
If you live in or around Bucks County, Pennsylvania, and are facing wage garnishment or considering bankruptcy, the Law Office of Michael Schwartz is here to help. Contact us today for a free consultation. We’ll walk you through your options, explain what debts can be discharged, and help you protect your paycheck.
Contact the Law Office of Michael Schwartz for help.
Frequently Asked Questions
Does filing bankruptcy immediately stop wage garnishment?
Yes. The automatic stay takes effect the moment your bankruptcy petition is filed, immediately halting wage garnishment in most cases.
Can bankruptcy stop garnishment for child support?
No. Child support is a nondischargeable debt, meaning garnishment for past-due child support may resume once your bankruptcy case concludes.
How long does the automatic stay last?
In a standard Chapter 7 bankruptcy or Chapter 13, the automatic stay remains in place throughout the case. If you have filed bankruptcy within the past year, the stay may be limited to 30 days or may not apply at all, unless a Motion to Extend the Stay is timely filed.
Can I get money back that was already garnished?
Possibly. If the garnishment occurred within 90 days of your filing and meets certain conditions, you or the trustee may be able to recover those wages through a preference action.
What is the most common cause of wage garnishment?
The most common causes include unpaid credit card debt, medical bills, personal loans, child support arrears, and federal student loan defaults.