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How Bankruptcy Affects Wage Garnishment

Posted on August 24, 2017 in

bankruptcy sign, debt lawyerBankruptcy places an automatic stay on any wage garnishments used to satisfy obligations to creditors. Until the stay is lifted, creditors cannot continue with collection actions against the debtor.

Automatic Stays on Wage Garnishments

When a debtor file for bankruptcy, the court enters an automatic stay on collection actions. As the process proceeds forward, creditors cannot garnish an individual’s wages. Debtors and their debt lawyer can provide the names and addresses of the individual’s creditors to the court, and the court will provide notification to the creditors that a bankruptcy is moving forward.

This automatic stay on collection actions will remain in place until the bankruptcy process is concluded. However, the length of the automatic stay can vary significantly from case to case. For example, in instances where the individual has filed for bankruptcy in the past year, the stay may only last a month or so. The court may also refuse to issue an automatic stay on priority obligations including alimony and child support. Moreover, in extenuating circumstances, the creditor can request the court to remove the automatic stay before the bankruptcy process is complete. However, in these cases, the creditor must be able to demonstrate that their motivation for collecting the money goes beyond simply wanting to collect funds that are owed to them.

What Happens After Bankruptcy?

If the debt is discharged through bankruptcy, the creditor can no longer pursue collection actions or wage garnishments against the debtor. It is crucial to understand that certain debts, such as alimony and child support obligations cannot be discharged in bankruptcy. Thus, once the bankruptcy is finalized, creditors may pursue wage garnishments for these debts. Moreover, these debts will continue to accrue interest for the period of time during which the court issued the automatic stay.

Recovering Garnished Wages

It may be possible to recover wages that were garnished during the 90 days prior to filing bankruptcy. A debt lawyer in Nevada can assist debtors in preparing the documentation required to show that the wages used to pay these debts were exempt. In order to recover these funds from the creditor, it is necessary to file a lawsuit against the creditor through the bankruptcy court. While generally not advisable for small sums, it can help individuals recover larger sums that can help them get back on their feet following a bankruptcy.