Can Bankruptcy Stop Wage Garnishment?
Adding insult to injury when you’re in debt, creditors can garnish your wages. Wage garnishment doesn’t give you the opportunity to put that money toward helping yourself get out of debt, and it can make getting out of debt harder. You may think that filing for bankruptcy is your best bet to make it stop and while it may help in some circumstances, that isn’t always the case.
Here’s what you need to know.
- Filing for bankruptcy usually stops wage garnishment right away, providing at least temporary relief.
- Wage garnishment can stop permanently or start again after bankruptcy, depending on the kind of debt and what happens in your bankruptcy case.
- Some kinds of debt can be wiped out through bankruptcy, while others — like alimony, child support and student loans — typically can’t.
- There are limits to how much money a creditor can take via wage garnishment.
- You may be able to stop wage garnishment or lower the amount by contesting the order or showing that you are exempt.
Does bankruptcy stop wage garnishment immediately?
Typically yes in the short-term, but whether it’s permanent or temporary depends on the type of debt you have and what happens in your bankruptcy case.
In most cases, when you file for bankruptcy, there is an automatic stay that stops creditors from collecting money from you, including wage garnishment, until your bankruptcy case is over.
The automatic stay gives you time to breathe while you work with your bankruptcy attorney to make your case. Keep in mind, though, that automatic stays don’t impact child support or alimony payments.
How does bankruptcy affect wage garnishment?
Bankruptcy is a legal process that lets people pay off or wipe out their debts. But not all debts can be discharged, or erased, and it’s ultimately up to the court whether to forgive your debts.
There are ultimately three potential outcomes:
- Wage garnishment doesn’t stop at all (for child support and alimony)
- Wage garnishment stops temporarily but then restarts after the bankruptcy case is closed
- Wage garnishment stops and doesn’t resume after bankruptcy because the debt was discharged
Which outcome you see depends on the type of debt you have, the type of bankruptcy you file and the court’s decision.
The type of debt matters most
Some debts can’t be discharged, or wiped clean. Here’s how common types of nondischargeable debt are typically handled during bankruptcy:
| Nondischargeable debt | Temporary automatic stay | After bankruptcy |
|---|---|---|
| Alimony | No | Wage garnishment continues |
| Child support | No | Wage garnishment continues |
| Most student loans | Typically yes | Wage garnishment resumes |
| Certain taxes | Typically yes | Wage garnishment resumes |
Filing for bankruptcy doesn’t stop your wages from being garnished for child support or alimony. These debts are exempt from temporary stays and can’t be discharged, or wiped out.
You can get temporary relief from wage garnishment for some taxes and student loans, but since these debts can’t be discharged through bankruptcy, the debt could still be collectible after your bankruptcy case closes. This means wage garnishment can eventually resume.
Chapter 7 vs. Chapter 13 bankruptcy
- Chapter 7 bankruptcy: Dischargeable debts can be wiped clean depending on the court’s decision.
- Chapter 13 bankruptcy: Dischargeable debts can be wiped clean after you’ve completed the court-ordered repayment plan.
When garnishment can restart after bankruptcy
When it comes to dischargeable debt, you still may not be in the clear. Your creditor can make a case to the bankruptcy court that there’s good cause to continue wage garnishment for dischargeable debt, which may or may not be successful.
It’s also possible that some of your debt isn’t discharged once your bankruptcy case concludes. In that case, because the automatic stay ends at the conclusion of a case, the creditor would be able to resume wage garnishment for any undischarged debt.
What are your legal rights during wage garnishment?
Wage garnishment can make you feel powerless, but federal laws do offer some protections.
Here’s a quick guide to your legal rights when your wages are garnished:
- Wage garnishment limits. Federal law typically limits wage garnishment to the lesser of: 1) 25% of your disposable income, or 2) the amount by which your disposable earnings exceed 30 times the federal minimum wage.
- State protections. The limit may be lower depending on where you live, as some states place their own limitations on wage garnishment. So you’d need to look up your state limits to understand your full rights in your state.
- Job protection. If your wages are being garnished for a single debt, your employer can’t use that as a reason to fire you.
- Collections protection. Most creditors and collections agencies must stop trying to collect debts while an automatic stay from bankruptcy is in effect.
- Wage recovery. You may be able to recover wages that were garnished within 90 days before filing for bankruptcy, assuming it meets the minimum amount (which changes periodically, so you’ll have to check when you file to be sure).
If you’re considering filing for bankruptcy, you’ll be required to complete a government-approved credit counseling course first. This course can help you better understand your rights and options before you take the next step.
When it comes to wage garnishment, your disposable income is defined as the amount of earnings left after legally required deductions are made — not the amount that you’d consider to be “disposable” income, which likely excludes things like rent and utilities.
Other ways to stop wage garnishment
Bankruptcy can help stop wage garnishment, but it isn’t the only option. Here are three alternatives to consider:
Pay off the debt or settle
Best for people who can afford it
If your wages are being garnished, you may not be in a position to pay off that debt — but if you’re among the few who can, that’s going to be the best way to both stop wage garnishment and preserve and improve your credit.
Otherwise, settling the debt with your creditor could be a solid option here. That would require you and your creditor to agree to either a lower debt amount or create a repayment plan for the full amount. There are debt settlement companies that may be able to do this for you, but they often charge expensive fees and there’s no guarantee that they’ll be successful.
Learn more about debt settlement and debt relief.
Challenge the wage garnishment order
Best for people who can prove the judgment or amount is wrong
Just because a creditor can garnish your wages doesn’t mean that they’re necessarily entitled to the full amount that they’re granted. You can challenge the wage garnishment order. In fact, the paperwork you get from the courts notifying you about the wage garnishment order should include your deadline to file an objection and how to do so.
Once you file a wage garnishment objection, the court may schedule a time to hear your objection and rule on it. You’ll need to provide reasonable grounds for your objection, such as evidence showing that you already repaid that debt.
File a wage garnishment exemption
Best for people whose income or situation qualifies for protection
You may be exempt from wage garnishment if you meet certain criteria. The exemptions may vary based on location, so you should talk to an attorney about your state’s requirements to understand if this is something you should pursue.
A hearing may be scheduled so that the judge overseeing your case can rule on whether or not you qualify for an exemption, depending on the state you live in. If you qualify, the judge may order that your wage garnishment be reduced or stopped altogether.
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