Unfortunately, wage garnishment is fairly common in the United States, with implications that can be far-reaching, both financially and emotionally. The sheer stress of wage garnishment can plague you at home and in your workplace. According to the U.S. Wage Garnishment Landscape, up to 7 percent of the current workforce is currently having their wages garnished, with about half of that due to unpaid child support. Gen X-ers have the highest garnishment rate, at between 10 and 11 percent. The Midwest leads all U.S. regions for the highest number of employees whose paychecks are being garnished.
While the stereotype is that of low-paid workers having their paychecks garnered even well-paid workers can be subject to wage garnishment. Debt has begun to significantly affect virtually every level of the American workforce. Wage garnishment can also affect employers; an employer can become liable to the creditor for the full amount of a wage garnishment if it fails to comply with the order to garnish an employee’s wages.
Facing wage garnishment can be a stressful and overwhelming experience. If you’re dealing with this situation, you’re not alone; solutions are available. At Simon Fitzgerald LLC, we specialize in helping individuals navigate through these challenging financial circumstances. Our experienced Louisiana bankruptcy attorneys can guide you through filing for bankruptcy, a legal tool that can stop wage garnishment and provide you with the financial relief you need.
What is Wage Garnishment?
Wage garnishment is a legal process where your employer withholds a portion of your earnings to pay off your debts. This can occur when you default on your debt, and your creditor obtains a court order. While it’s a standard debt collection method, it can significantly impact your financial stability and make it challenging to meet your basic living expenses.
However, filing for bankruptcy can provide an immediate stop to wage garnishment. This is due to an injunction known as the automatic stay, which comes into effect as soon as you file for bankruptcy. The automatic stay prohibits most creditors from continuing collection activities, including wage garnishment.
Wage garnishment can be used to collect unpaid taxes, child support, a loan default, credit card bills, student loan debt, and other debts as well. Disability benefits and Social Security benefits are exempt from garnishment, and a court order is necessary before your wages can be garnished. The only time your wages can be garnished without the benefit of a court order is when you owe money to the federal government, like the IRS. In the state of Louisiana, your paycheck cannot be garnished more than 25 percent of your disposable earnings, or the amount by which your disposable earnings exceed 30 times the federal minimum wage—whichever is less.
For more information on understanding wage garnishment:
- U.S. Department of Labor on Federal Wage Garnishments
- Facts About Wage Garnishments
- What are the rules for wage garnishment during bankruptcy?
How Can Bankruptcy Stop Wage Garnishments?
Bankruptcy is a powerful tool that can help you regain control over your financial situation. When you file for bankruptcy, the court issues an automatic stay, immediately stopping most creditors from collecting debts. This includes halting wage garnishment, giving you immediate relief, and the opportunity to discharge or restructure your debts.
Chapter 7 bankruptcy allows for the discharge of certain unsecured debts, including credit card debt, medical bills, and personal loans. If your wages are garnished to repay these debts, filing for Chapter 7 bankruptcy can stop the garnishment immediately and potentially erase the debts. The automatic stay used in a Chapter 7 bankruptcy stops creditors from pursuing collection activities and this includes wage garnishment. Following are how Chapter 7 and Chapter 13 bankruptcy can potentially be used to halt wage garnishment. There are, however, certain exceptions. Creditors may request that the bankruptcy court lift the automatic stay, which will only happen if:
- Your creditor settled debts with collateral, like a car or house, or
- The creditor can show they will lose a significant amount of money if they are forced to wait until the end of the case under the automatic stay.
When you file for Chapter 7 bankruptcy, a list of all your creditors must be submitted. Once you submit that list, each of those creditors will be sent a notice from the bankruptcy court that orders them to stop all wage garnishment and other collection activities. If you received a rejection of a Chapter 7 bankruptcy filing within a year of your present filing, the automatic stay is not nearly as long—only 30 days. Your attorney can, however, request an extension of the automatic stay on your behalf.
No automatic stay will be put into place to stop wage garnishment if this is your third filing within the past year. Your attorney can ask the bankruptcy court to put a stay into place and enforce that stay, but it is not automatic. The rationale behind this is that debtors are not allowed to utilize “serial bankruptcy” filings as a method of indefinitely preventing wage garnishment.
When your Chapter 7 bankruptcy ends, the automatic stay will also end. Hopefully, any debts that were subject to wage garnishment will have been discharged as a result of your bankruptcy. If this is the case, your employer is not legally allowed to continue garnishing your wages. If, however, your bankruptcy petition was rejected or dismissed before it was discharged—or certain debts remained after the bankruptcy—the creditor is allowed to continue wage garnishment.
Chapter 13 bankruptcy, however, involves creating a repayment plan to repay your debts over three to five years. While wage garnishment for unsecured debts will stop, wage garnishment for domestic support obligations like child support or alimony will continue. Chapter 13 bankruptcy is to create a plan that allows you to pay off all your debts over three to five years, wage garnishments will stop so long as you comply with your plan. The court could, however, potentially order that your repayment plan be fulfilled through wage garnishment.
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There are limited circumstances under which you may be able to file for bankruptcy and recoup wages that were previously garnished. Wages that were garnished within 90 days before your bankruptcy filing that amount to $600 or more could be returned provided you have sufficient exemptions. This is not a given, so you should not automatically expect to have your garnished wages returned to you. It also requires a highly experienced bankruptcy attorney who is knowledgeable about wage garnishment and how bankruptcy can affect garnishment.
Meet Olivia and Ethan: Stopping Wage Garnishment – A Success Story
Olivia and Ethan, a young couple in Shreveport, were facing a financial crisis. Both had lost their jobs during an economic downturn and struggled to keep up with their mounting debts. Credit card bills, medical expenses, and personal loans were piling up, and their creditors were becoming increasingly aggressive.
The situation became worse when one of their creditors obtained a court order for wage garnishment. Ethan had recently found a new job, but now a significant portion of his income was being withheld to pay off their debts. The couple barely made ends meet, and the wage garnishment pushed them to financial ruin.
Desperate for a solution, Olivia and Ethan turned to Simon Fitzgerald LLC for help. Our experienced bankruptcy attorneys quickly assessed their situation and determined that filing for Chapter 7 bankruptcy would be the best course of action. By doing so, an automatic stay was enacted, halting the wage garnishment and providing the couple with much-needed relief.
Our team guided Olivia and Ethan through bankruptcy, ensuring they understood their rights and options. We worked diligently to discharge their unsecured debts, including those that had led to the wage garnishment. The couple was able to eliminate their burdensome debts and regain control over their financial lives.
Today, Olivia and Ethan are on the path to financial stability, free from wage garnishment stress and anxiety. They are grateful for the compassionate and practical legal guidance they received from Simon Fitzgerald LLC and are optimistic about their financial future.
If you, too, are facing wage garnishment and need assistance, don’t hesitate to contact our dedicated team of bankruptcy attorneys. We’re here to help you navigate this challenging time and provide the tools and support you need to achieve financial freedom.
Frequently Asked Questions
Stopping wage garnishment can be challenging, and it’s normal to have questions about how bankruptcy can assist. We’ve compiled some of the most frequently asked questions about stopping wage garnishment to help you understand what to expect.
- How does Chapter 7 or Chapter 13 bankruptcy affect wage garnishment in Louisiana?
- What are the alternatives to bankruptcy for stopping wage garnishment in Louisiana?
Why Choose Simon Fitzgerald LLC to Overcome Wage Garnishment?
When overcoming wage garnishment, you need a team that combines experience, compassion, and commitment. At Simon Fitzgerald LLC, we’ve built a legacy of helping clients regain control of their finances. Our team of experienced bankruptcy attorneys is committed to providing you with the guidance and support you need to overcome wage garnishment. We’ll work closely with you to understand your financial situation, explore your options, and determine the best course of action.
Filing for bankruptcy can be the best way for you to achieve debt relief if you are struggling with overwhelming debt. There are alternatives to bankruptcy, but these alternatives are not always as successful as bankruptcy in providing total debt relief. You should always weigh the pros and cons, after speaking to a knowledgeable wage garnishment bankruptcy attorney from Simon Fitzgerald.
With our legacy as a foundation, you can trust that we will assist you in resolving your financial issues. Ready to take control of your finances? Are you feeling overwhelmed by your financial situation? Our easy-to-understand e-book can help you understand more about bankruptcy. When you’re ready, you can check your eligibility for bankruptcy right here. Our bankruptcy experts are always here to help if you have any specific questions. Click here to schedule your free consultation today.
