With a judgment in hand, a creditor can garnish the person’s wages. Typically, a creditor can take 25% of net earnings from each pay check until the entire debt – plus collection fees – is paid off.
What can you do if you received an earnings withholding order, or, worse yet, if your wages are already being garnished? One of the options is to do nothing and allow the wage garnishment to continue – however, wage garnishment can take months or years to complete and the effect is often devastating, making it even more difficult to pay for rent, gas and other necessities. Another option is paying off the debt in full through other means or settle with creditor for a smaller amount – however, many people in this situation have limited savings and may not have the means to pay off the debt right away or pay for settlement. Another is quitting your job – cutting off your income is counterproductive, though, and the creditor can go after any new sources of income you have or can try other collection tactics such as bank levies.
Another possible solution is filing bankruptcy. Bankruptcy stops most cases of wage garnishment – notable exceptions are child support payments and garnishment due to criminal proceedings. For an average consumer, the wages are commonly garnished because of credit card debt, taxes, payday loans or personal loans, medical debt and student loans – and bankruptcy can resolve or alleviate all of these issues.
If your bankruptcy case is filed before the garnishment starts, then garnishment will not go forward. If any funds do get taken from you after the case is filed, they would normally be refunded to you.
If your bankruptcy case is filed after the garnishment has already started, the case will usually prevent future garnishments. And, what’s even better – you may be able to get some or all of the funds that have already been garnished. If the creditor garnished more than $600 from you within 90 days prior to the filing of the bankruptcy case, the creditor would have to issue a refund for the amount that that the creditor received in the 90 days prior to filing. Creditor does not have to return any funds that were garnished more than 90 days prior to the filing of the case.
For these reasons, if you are going to file bankruptcy and have wage garnishment, act quickly to prevent loss of wages. Consult your local bankruptcy attorney to see if filing bankruptcy would be a good solution in your situation, to see what type of bankruptcy would suit your needs in the best way, and how different types of debts that you have would be treated by the bankruptcy court in your situation.