bankruptcy paper with pen onside
Do you struggle to pay your bills because you have creditors garnishing your wages? If so, filing for bankruptcy could offer some relief for you. Filing for bankruptcy stops wage garnishments and offers a fresh start to people who desperately need it. Understand these things about bankruptcy and its effects on wage garnishments.
Filing for Bankruptcy Results in an Automatic Stay
Filing for bankruptcy has consequences, but it also offers relief for people with major loads of debt. One way it offers relief is through a court-ordered automatic stay.
As soon as the court receives your bankruptcy filing documents, they will issue an automatic stay, which tells creditors to stop contacting you for payment. It forces your creditors to stop every form of collection effort they have, including wage garnishments. When your creditors receive this notification, they must take every action possible and quickly to stop collecting or trying to collect any money from you.
This includes wage garnishments of most kinds; however, the automatic stay does not typically stop wage garnishments for child support or alimony, though this depends on which type of bankruptcy you file.
The Automatic Stay Ends Faster With Chapter 7
The automatic stay the court orders after you file for bankruptcy offers a lot of relief for people with financial problems. It ends the phone calls, the letters, and the wage garnishments. It also stops a foreclosure and a repossession, but the automatic stay will not last forever.
If you file for Chapter 7 bankruptcy, the automatic stay ends much faster than if you had filed for Chapter 13. This is primarily because of the differences in these chapters. With Chapter 7, the court forgives any unsecured, qualifying debts through a discharge. This takes place several months after you file; and once you receive the discharge, your automatic stay ends.
When a Chapter 7 automatic stay ends, any creditors that you still owe money to can start the wage garnishments back up again. However, if the court discharged a debt a creditor was garnishing your wages for, this creditor cannot garnish your wages for the debt. You would no longer owe the debt if the court discharged it.
Chapter 13 Offers an Extension of Time to Repay Your Debts
Through Chapter 13, the automatic stay lasts much longer because this branch of bankruptcy requires a three-year to five-year repayment plan. The automatic stay you receive from Chapter 13 lasts until you complete the entire repayment plan. In other words, it could last up to five years.
If creditors are garnishing your wages, they cannot pursue the debt you owe during this three-year to five-year period; however, there are certain creditors that can continue pursuing debts you owe, including child support, student loans, and taxes.
You must repay these types of debts in full, but you can choose from two options. You could allow the wage garnishment to continue until the debts are paid, or you could include these debts in your repayment plan and pay them with the money you send the trustee each week or month.
Before you decide which option to use, talk to your lawyer in depth about it. Your lawyer will tell you the pros and cons of each option, and this could help you make the right choice. Don’t try to figure out this complex matter on your own.
If you cannot find a way to get out of the debt problems you currently have, contact Frances H. Hollinger, Attorney at Law. Our firm can analyze your current financial situation and help you determine what option is best for you. Reach out to us today to get started.