Bank and wage garnishment are powerful strategies for debt collectors to secure delinquent debt. Bank garnishment allows a debt collector to freeze a checking or savings account and freely make withdrawals to satisfy the debt. Wage garnishment forces automatic deductions from the debtor's paycheck each pay period, with the money sent to the debt collector. The most effective way for a debtor to stop or avoid garnishment is to file for bankruptcy. Garnishment is not possible while a debtor is completing a bankruptcy agreement.
The Automatic Stay
A powerful provision of bankruptcy, called "the automatic stay," immediately ends all debt collection efforts, including garnishment. Avoiding or ending garnishment is a primary reason why some people file for bankruptcy. State laws vary, but depending on the state, debtors can lose up to 50 percent of their paycheck to garnishment. Debtors losing that much income to garnishment may feel they have no choice but to file for bankruptcy.
Process
People filing for bankruptcy can end garnishment in as little as one business day. After the debtor files for bankruptcy, a judge will sign the automatic stay, ordering all the debtor's creditors to immediately end collection efforts. Garnishments already in progress must stop after a debtor files for bankruptcy. The debtor could hand-deliver a copy of the automatic stay to an employer or bank. Bankruptcy courts offer emergency applications for people who need quick relief from garnishment, eviction, foreclosure and other debt collection efforts. The emergency petitions allow debtors to fill out special forms to qualify for bankruptcy in a day. A creditor cannot start garnishment efforts against someone already in bankruptcy.
Alternatives
Filing for bankruptcy is a big price to pay for stopping garnishment. Bankruptcy remains on credit reports for a minimum of seven years and makes it challenging for the debtor to qualify for credit at reasonable rates for several years. Debtors attempting to end garnishment should explore alternatives to filing for bankruptcy. For example, a debt collector may agree to end garnishment as part of a settlement agreement for the full amount of the debt -- with the debtor paying an additional fee for ending the garnishment. A debtor may offer to pay say, a flat fee of $1,000 for ending the garnishment and begin making monthly payments with the first few payments due immediately. That's an expensive settlement but could be preferable to problems caused by bankruptcy.
Precautions
Resolving debts before they reach garnishment is the best strategy. Credit counselors or consumer affairs attorneys can offer advice for handling excessive debt before it leads to garnishment. Garnishment is possible only after a debt collector wins a lawsuit, a court judgment and approval from the courts to pursue collection through bank or wage garnishment.
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