If you have an outstanding debt with a creditor, they have the option to go to the court and demand your wages garnished. There will be a court proceeding in which the judge will more times than not rule in favor of the creditor and determine your wages may be garnished. At this point, your employer will be ordered to remove a certain amount from every paycheck and send it directly to the creditor. You will be left with a small paycheck you cannot do much of anything with. This can leave you struggling even more to make ends meet.
Bankruptcy Stops Garnishment Immediately
Under American bankruptcy laws, garnishment of your wages must be stopped the instant you enter a bankruptcy filing. The creditor is required to show up to court to discuss your debt and work out a reasonable repayment solution in keeping with your income and your other financial obligations. As such, your bankruptcy attorney will have to go over all of your sources of income, as well as the other debts you have.
Compiling a proper budget to submit to the court allows you to have the good faith you can make all of your payments. Creditors appreciate working with you and the court in order to receive the payments they require. Just make sure you are being as honest as possible with your bankruptcy attorney. Their job is to try to help you to create a realistic budget you can actually stick to. If you are embarrassed about your income or try to fudge the numbers at all, it can come back to haunt you later on when you are unable to stick to your repayment plan and your wages are garnished again.
What Happens if a Creditor Refuses to Work with the Court?
When you file for bankruptcy, your creditors are required by federal law to work with the court to come up with a reasonable repayment process. This includes lowering your payments for each month or the interest rate attached to your payments. If the creditor will not work with you to repay your debt, the court has the option to discharge the debt altogether and fine the creditor. It is in the best interest of the creditor to show up to court to avoid fines and the discharge of the debt. Creditors will show up, because it means they can get the money they are owed.
Keep in mind a bankruptcy is not going to stop you from owing the creditor for your debt. You will still be required to repay the debt in full (unless you are going through a Chapter 7 liquidation bankruptcy). Working out a reasonable repayment plan can help you to make sure you are getting the most from your bankruptcy and prevent your wages from ever becoming garnished again in the future. This will allow you to finally start working on getting out of debt and having the kind of financial future you have dreamed of.