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Bankruptcy and Wage Garnishments

Since 1995, Holly Schumpert has provided bankruptcy assistance and representation for both individuals and businesses.

Bankruptcy Stops Most Wage Garnishments

Wage garnishments can significantly reduce your take home pay and cause you to get behind or miss important payments to your car, house, furniture and other creditors. Filing a bankruptcy before the garnishment starts can prevent the employer from deducting from your pay. If the garnishment is already in place before the filing of a bankruptcy, the bankruptcy can stop the garnishment upon filing the case. If you are being garnished, filing a Chapter 7 bankruptcy not only stops any future garnishment, it may allow you to have the recently garnished funds to be reimbursed back to you. If you are being garnished, filing a Chapter 13 bankruptcy stops any future garnishments and directs any recently garnished funds to be forwarded to your Chapter 13 Trustee for payment under your plan. The Chapter 13 case and plan are designed to restructure your debt to make it more affordable to pay back and save your property, such as your house, car, furniture, etc… Once a discharge is issued, you can begin your “fresh start.”

Wage Garnishment

Under federal and state laws, a creditor may obtain a court order or judgment that enables them to file a garnishment against your wages. Federal law restricts a wage garnishment to no more than 25% of your income. If you are being garnished or about to be garnished, you should seek legal consultation on how to best stop the garnishment with your specific facts and circumstances. Bankruptcy can be an effective tool to stop wage garnishments and resolve your financial problems and give you the “fresh start” that you deserve.

Although, most garnishments are stopped or “Stayed” by the filing a bankruptcy, a bankruptcy does not stop wage assignments or garnishments for ongoing child support. Sometimes a Chapter 13 plan can resolve child support issues where there is only arrears owed or where there is no child support order is being honored by the employer at the time of the bankruptcy filing.

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Automatic Stay

Upon the filing of a bankruptcy, federal law “stays” almost all collection efforts by creditors. With limited exception, creditors are prevented from any further collection activities. Creditors are prevented from calling or contacting you, filing or continuing with a filed law suit, sending threatening letters and bills, eviction, foreclosure, repossession, utility cut off and garnishments.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy provides for your debts to be reorganized into a payment plan to be paid over a three to five year period, making your debts more affordable and enabling you to keep or save your property. The repayment plan is structured through the
Federal Court system and an appointment of a Trustee as a disbursing agent to your creditors. The Chapter 13 Trustee is a court-appointed trustee, who performs like an intermediary in receiving and distributing payments to your creditors. Not all creditors receive dollar for dollar what is owed to them. However, once the court issues a discharge, the debts are no longer owed. They are no longer your personal responsibility or liability, as they are discharged, or no longer owed.

Chapter 7 Bankruptcy

Chapter 7 Bankruptcy is a very quick bankruptcy option, typically lasting only up to four months from filing to discharge. Unlike a Chapter 13 case, where payments are made to all creditors to some extent, a Chapter 7 case does not propose to pay back creditors, except those secured creditors that you wish to keep, such as automobile loans, mortgages, furniture accounts, etc….Once your Chapter 7 case is discharged, you are no longer legally liable for the debts, except those secured debts that you choose to maintain or non dischargeable debts, such as student loans, criminal court costs, some IRS debts, child support, etc…