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Bankruptcy can help stop wage garnishment

The rate at which individual people filed for bankruptcy hit an all-time high during the Great Recession. The number continues to decrease, and as of 2016, a little under 800,000 people filed for bankruptcy, according to Bloomberg BNA.

Americans who have accumulated too much debt may be hesitant to file for bankruptcy. However, it can be a useful tool for getting your financial accounts back on track. It is especially worth looking into if you currently have part of your wages garnished. While the exact results will vary on a case-by-case basis, there are many circumstances where a person can end wage garnishment through bankruptcy. 

What happens?

Once you file for bankruptcy, the courts place an automatic stay on all your accounts. An automatic stay is an injunction that immediately halts all the activities carried out by creditors. Automatic stays only work on certain types of debts. For example, if you have succumbed to medical or credit card debt, then an automatic stay will prevent those creditors from garnishing funds. In contrast, if you have fallen into debt due to unpaid child support payments, then an automatic stay will not exempt you from making those payments. A great advantage to this is that at the end of the bankruptcy, the remaining portion of the unsecured debt becomes discharged, so creditors cannot garnish wages even at this point. 

What about wages already garnished?

There are no guarantees, but there have been cases where a person who filed for bankruptcy was able to recover a portion of garnished wages. Any funds taken from you in the months leading up to the filing may go back to you. 

How can someone avoid garnishment while petitioning for bankruptcy?

One of the first things to do after filing for bankruptcy is to inform your employer. This lets your boss know not to send portions of your paychecks to the creditor. Provide all the necessary paperwork, so your boss can trust the action is legitimate. 

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