Wage Garnishment and Bankruptcy

Bankruptcy Attorneys in DuPage County Helping Debtors Face Collections and Credit Issues

Bankruptcy is a way to relieve financial pressure, particularly if you are facing wage garnishment. Wage garnishment is a procedure used to withhold your earnings in order to pay debt. Creditors may use wage garnishment to try to collect outstanding debt. This means that your employer garnishes wages from your paycheck each month. Typically, the creditor will have filed a lawsuit and won a money judgment. By filing for bankruptcy, the law provides you protection through an automatic stay. If you or someone close to you is facing wage garnishment, a skilled DuPage bankruptcy lawyer can help. At the Bankruptcy Center of Illinois, wage garnishment and bankruptcy attorneys are ready to help you understand your legal rights and debt relief options.

Wage Garnishment and Bankruptcy

Wage garnishment or wage attachment occurs when a creditor wins a lawsuit against you, receives a money judgment and then orders the court to garnish wages. This order is sent to the debtor’s employer, and they take out some of your wages, each payment period. The amount retained is then sent to the creditor. The amount of your paycheck that can be garnished is set by federal and state law.

As a collection action, wage garnishment must be halted once an individual files for bankruptcy. There are exceptions, for child support collections, for example. In some cases, creditors can be contacted in order to work out a payment schedule.

Additionally, wage garnishment may be ordered in error, and an objection in court may be appropriate. Contesting the ruling is an option for some debtors, and a bankruptcy lawyer can help you assess whether this is an appropriate move.

Automatic Stay and Collection Efforts

The automatic stay imposed by bankruptcy will stop wage garnishment. Whether you file under Chapter 7, Chapter 11, or Chapter 13, an automatic stay stops creditor actions to collect debt. These collection actions include wage garnishment.

After a debtor files for bankruptcy, the court receives a list of creditors and their contact information. The court notifies creditors of your bankruptcy filing. The creditor is required to then suspend wage garnishment. It may be advantageous to provide a copy of the bankruptcy filing directly to the creditor. If filing for bankruptcy occurs shortly before garnishment takes place, it may be advisable to provide information about the bankruptcy directly to the creditor.

Creditors can ask that the court lift an automatic stay. It is not usual for the court to lift a stay, however, if the creditor will lose money if they are forced to wait, or if the creditor has debt secured by collateral, the court may lift the stay.

When the bankruptcy case ends, the automatic stay ends as well. A common situation is that the bankruptcy discharges the debt that was the subject of the wage garnishment. The creditor cannot then continue the wage garnishment.

Alternatively, if the case was dismissed then the creditor can continue to garnish wages. If the particular debt that is the subject of the wage garnishment was not wiped out, the creditor can also continue to garnish your wages.

Understand Your Wage Garnishment and Bankruptcy Proceeding by Consulting a Dedicated DuPage Bankruptcy Attorney

At the Bankruptcy Center of Illinois, we help clients understand how the bankruptcy process works, and the ways that it can help. Our skilled lawyers guide you through the process of filing for bankruptcy and explain how wage garnishment can be stopped. Our goal is to help clients lessen their stress concerning their finances and regain control over their lives. We proudly represent clients throughout the DuPage area, as well as localities of Cook County such as Oak Lawn, Hoffman Estates, Schaumburg and Chicago. We are available to consult by phone, and can be reached by calling (773) 993-0024 or through our online form.