Wage garnishment occurs when a Texas State court issues an order that requires your employer to withhold a portion of your paycheck and send it directly to a person or entity to which you owe money. Generally, garnishment continues until a debt is paid off in full.
The debts for which a wage garnishment order may be entered include student loans, child support, alimony, taxes, and any credit card or loan debts that have been the subject of a collections lawsuit that resulted in a judgment against you.
If a creditor wins a lawsuit and a money judgment is entered on its behalf, the creditor can garnish your wages by giving a copy of the court order to the local sheriff, who then sends it to your employer. Federal and Texas regulations govern how much of your paycheck may be garnished.
Can Bankruptcy Stop Garnishment in Texas?
You can protest wage garnishment by filing papers and proving to the court that you need more of your paycheck to pay off your expenses or that you qualify for an exemption. If the judge will not terminate the garnishment, in some cases, filing for bankruptcy is another option to halt wage garnishment.
However, you should be aware that bankruptcy will not help stop garnishment of child support or other non-dischargeable debts. For example, the resulting automatic stay will not affect child support or alimony, since these are “priority debts” that are non-dischargeable. Speak with a bankruptcy lawyer in Houston, TX for details on your unique case.
When any creditor that is affected by the stay wants to continue its collection efforts after the filing of bankruptcy, it must prove to the court there is good cause to lift the stay. Generally, unsecured creditors that want to continue garnishing your wages will not be able to adequately show good cause to get a stay lifted.
So, does bankruptcy stop garnishment? In many cases, the answer is yes.
Can You File Bankruptcy After Wage Garnishment?
If you file bankruptcy after a wage garnishment has begun, filing bankruptcy to stop wage garnishment should work, and you might even be able to get back some garnished wages. It’s usually better to avoid a loss by filing for bankruptcy as fast as possible.
To get back some of your garnished wages, the garnishment will have had to have occurred during the ninety (90) days before the bankruptcy filing date. It will need to exceed a particular amount (this amount changes periodically), and you’ll need to be able to protect that amount with an exemption available under Texas laws.
How Fast Does Bankruptcy Stop Wage Garnishment?
As soon as you file for bankruptcy, the United States Bankruptcy Court will issue an “automatic stay.” This is a legally-enforceable court order that requires creditors to stop trying to collect debts, including wage garnishment.
Does Filing Chapter 7 Stop Garnishment?
Yes, a Chapter 7 Bankruptcy will stop garnishment, provided the debts are dischargeable.
According to the United States Courts, there are specific types of garnishment that you should be aware will not stop with Chapter 7. For example:
- Will filing bankruptcy stop student loan garnishment? — No.
- Can bankruptcy stop a tax garnishment? — No.
- Will bankruptcy stop an IRS levy? — No.
The wage garnishments that will continue are those connected with debts that Congress determined it was more beneficial for society to not have dischargeable, so generally, court-ordered debts and debts to the government.
A non-exhaustive list of non-dischargeable debts includes domestic support obligations, like child support or alimony, student loans, fines and restitution, and personal injury debts caused to others from the debtor’s negligence or intoxication.
Does Chapter 13 Bankruptcy Stop Garnishment?
By contrast to Chapter 7, a Chapter 13 Bankruptcy should put a hold on most garnishments, including those for:
- Debts resulting from property settlements in a separation or divorce
- Debts from tax obligations that are not dischargeable
- Debts incurred from willful/malicious property injury
Be aware, however, that in Chapter 13 bankruptcy, you must fully pay your obligations during a three-to five-year plan. Thus, you are trading off wage garnishment for an actual good-faith payment of some portion of your debt. A garnishment will only stop while the Chapter 13 bankruptcy is active and you’re making your planned payments.
I Filed Bankruptcy – Still Being Garnished
After you file your bankruptcy case, it can take the court a week or more to send the official case notification to all your creditors. In the meantime, to make sure that your garnishment stops quickly, you or your attorney will want to inform both your employer and the garnishment creditor by providing them the bankruptcy case number, filing date, and court location.
Once the creditor is on notice of your bankruptcy case, the garnishment must stop — even if the employer has only received your notification and not the court’s. Allowing the garnishment to continue would violate the automatic stay, which is a valid and fully-enforceable federal court order. Deliberate action to violate the order is worse – contempt of court.
The sections below outline potential reasons your wages are still being garnished after filing bankruptcy.
Court Hasn’t Sent Case Notification to Creditors Yet
Once you file for bankruptcy, an automatic stay will go into effect. This stops most collection activities, including wage garnishments on dischargeable debts, as long as the stay is in effect.
The court will notify your creditors of the stay, but if the creditors are not alerted in time to stop wage garnishment, you can give notice of the bankruptcy to your employer’s payroll department, as well as the levying officer handling the wage garnishment, which is usually the sheriff in your county. Both are required to stop garnishments upon being notified of the bankruptcy.
Automatic Stay for Repeat Bankruptcy Filing
When you want creditors to stop harassing you, filing for bankruptcy can be a helpful resource. As we have discussed, the automatic stay immediately puts a stop to collection activities, such as telephone calls, foreclosures, and lawsuits. However, multiple filings within a years’ time suggest that a manipulation of the bankruptcy system is taking place by the filer.
So, if this is your second or third filing this year, you’ll have to demonstrate that you’re filing for bankruptcy in good faith if you want the full protections afforded by the automatic stay. If not, your stay may be reduced to thirty (30) days or may not take effect at all.
If you’re wondering, “How many times can you file bankruptcy in Texas?” – our article has more details.
After your bankruptcy case, your creditors cannot resume garnishments on discharged debts, such as credit card balances, personal loans, and medical bills. But remember that your creditors can resume garnishments on non-dischargeable debts and may be able to continue these during the bankruptcy, in some cases.
Also, “post-petition debts” — any new bills that you incur after you file your initial bankruptcy paperwork— do not qualify for discharge. You’ll remain responsible for paying for them.
Wages Being Garnished? Seth Kretzer Can Help Your Bankruptcy Case
When you are trying to figure out how to avoid or manage wage garnishment during bankruptcy, you will need a lawyer with specific experience on bankruptcy in Texas who has the right knowledge and resources to help you.
Contact the Law Offices of Kretzer and Volberding P.C. today through our website to schedule a free consultation regarding your case.