Does filing Chapter 7 bankruptcy stop a wage garnishment?
Many individuals who find themselves unable to pay their debts face the potential of having their wages garnished. A wage garnishment is a court order directing an employer to withhold part of an employee's earnings and pay it directly to a creditor until the debt is paid off.
In Alabama, most creditors need to obtain a court judgment stating that you owe them money in order to obtain a wage garnishment. Moreover, if you lose a lawsuit and a money judgment is entered against you, the party that prevailed in the lawsuit can also garnish your wages. Your wages can be garnished without a judgment, however, for unpaid income taxes, court ordered child support, support arrearages, and defaulted student loans.
Under Federal law, creditors cannot garnish more than 25% of your disposable earnings (the amount that remains after mandatory deductions) or any amount greater than 30 times the minimum wage, whichever is less. Because Alabama has not imposed stricter limits, the federal law applies. Different thresholds apply to child support and spousal maintenance, student loans, and back taxes, however.
How to Defend a Wage Garnishment
If you can demonstrate that the garnishment will cause hardship, it is possible to have the amount reduced or the garnishment eliminated. In order to do so, a Claim of Exemption must be filed with the court that issued the garnishment. The court will hold a hearing to consider evidence of hardship, including the potential that the garnishment will lead to foreclosure, eviction or another drastic action.
Another way to stop a wage garnishment is by filing for Chapter 7 bankruptcy, however, this will have long term consequences on your ability to borrow money in the future. Ultimately the best way to avoid a wage garnishment is to prevent a creditor from pursuing a judgment against you. Regardless of the type of debt, the creditor must attempt to collect the debt before seeking a garnishment. If you are unable to pay your debts and creditors are contacting you, you should consult with an attorney who can help negotiate a debt settlement
If your wages have been garnished, an attorney can also help you pursue a hardship exemption, or in the alternative file for bankruptcy. While filing bankruptcy requires careful consideration, it may enable keep your hard earned money and get a fresh start.