A garnishment is a powerful collection tool used by many creditors to collect on a judgment for money owed to them. The two types of garnishments are account garnishments and wage garnishments. The creditor directs your bank or employer to pay money that is owed to you, directly to the creditor instead.
A creditor can file a garnishment against a bank account or other account-holder. There are some exemptions that remove certain funds from the reach of creditors, but in many circumstances the creditor can remove the full amount owed from your account.
A creditor can serve your employer with a wage garnishment directing that a certain portion of your paycheck be sent directly to the creditor or the court. A wage garnishment is usually “continuing,” which means it continues to apply to all of your paychecks until the creditor has been paid in full. If your employer fails to comply with the garnishment order, your employer can be held accountable to pay the total amount due.
It is important to note that federal law limits the percentage of income a creditor can garnish to your “disposable income.” This is the amount of your paycheck less mandatory deductions such as taxes, social security, etc.
How Bankruptcy Helps
As soon as your Chapter 7 or Chapter 13 has been filed, the automatic stay is effective and prohibits any further collection activity. This includes any pending garnishments, which are immediately halted. It also means that you will begin to receive the full amount of your paycheck again. In many cases, the debt linked to the garnishment is discharged, which means you are no longer responsible to pay it when you emerge from bankruptcy.
If you are facing a wage or account garnishment, contact us to discuss all of your debt relief options.