If someone is facing a bankruptcy, he or she may wonder how that bankruptcy will affect other aspects of his or her life. If the individual is already under a wage garnishment order, it is a reasonable question for someone facing bankruptcy.
What happens to this current wage garnishment order?
Understanding Chapter 7 Bankruptcy
Chapter 7 bankruptcy is also often referred to as a “liquidation” bankruptcy. Once bankruptcy is filed, the debtor is protected from collection activity by his or her creditors by an “automatic stay.”
The automatic stay stops any proceedings or debt collection actions that are going on against the debtor. All creditors will have a chance to work with the bankruptcy trustee, but ultimately, after all is said and done, the individual facing bankruptcy will receive a discharge of his or her unsecured debts.
Understanding Wage Garnishment
Not all people understand what wage garnishment entails. Wage garnishments generally cannot occur without some type of court order. Creditors specifically cannot seek a wage garnishment without first filing a law suit and obtaining a judgment.
Wage garnishments for student loans, taxes or child support are common in Texas. After a judgment is obtained, it is then sent to the debtor’s employer who then must send a portion of debtor’s wages to the creditor.
However, limits do exist as to how much can be taken out of that debtor’s paycheck monthly. A bankruptcy attorney can advise as to what those limits are for each person.
The Automatic Stay
As stated previously, once bankruptcy is filed, an automatic stay is issued. The stay prevents creditors from taking any debt collection actions against the debtor during the bankruptcy matter.
Keep in mind that wage garnishment normally comes from a collection proceeding. Therefore, the automatic stay will put a halt to wage garnishments, as well.
Certain exceptions do exist. Once the automatic stay is in place, the creditor can always request the bankruptcy court to lift the automatic stay. Normally, wage garnishments that result from collection actions are always stopped as soon as a bankruptcy case is filed.
Notification To Employer Of Automatic Stay
The question then is: how is the employer notified of the automatic stay, and how does he or she know to stop garnishing the employee’s wages? This notification is normally provided by the bankruptcy court.
When the debtor files for Chapter 7 bankruptcy, he or she must include a list of all creditors and their addresses. The court will then inform each creditor of the filing.
It is then up to that creditor to stop the wage garnishment. A debtor’s attorney may also send a copy of the filings to the creditor, as well.
What Happens To The Garnishment Upon The Close Of The Bankruptcy Case?
Once the bankruptcy case ends, so does the automatic stay. What happens then to the wage garnishment? It depends on what debt is associated with the wage garnishment.
If the debtor’s wages were garnished by a creditor’s collection action, normally the debt that was associated with the garnishment is discharged through Chapter 7 proceedings.
However, if the bankruptcy case is dismissed and not successfully discharged, the creditor may resume garnishment of the debtor’s wages.
CONTACT AN ARLINGTON BANKRUPTCY ATTORNEY FOR A FREE CONSULTATION TODAY
An experienced Texas bankruptcy lawyer can help you understand the procedure for ending wage garnishments and can address any concerns you have about the bankruptcy process.
Call the Law Office of Marilyn D. Garner today at 817.381.9292 for a free consultation to discuss how bankruptcy may help you.