Bankruptcy provides protection against garnishment, making it impossible for traditional creditors like credit card companies to garnish your bank account or wages. However, there is one notable exception. A company managing a pension fund could garnish your wages, if you failed to repay a loan payment for the pension.
Identification
Bank or wage garnishment allows debt collectors to take money from a debtor's bank account or paycheck. The debt collector must first file a lawsuit in civil court to obtain a judgment. After that, the debt collector can request garnishment of the debtor's bank account or wages. Banks comply by freezing the debtor's bank account and giving only the debt collector the right to withdraw money from it. Employers must immediately begin sending a percentage of the debtor's wages to the debt collector each payday.
Solution
Many apply for bankruptcy because of garnishment. Once a debtor files bankruptcy, the court will order an end to all active garnishments and prohibit future garnishment while the bankruptcy is in effect. A company managing a pension fund could file a legal motion to allow garnishment despite the bankruptcy. Overall, bankruptcy stops virtually all garnishment activity resulting from monetary judgments awarded in court. Examples of monetary judgments include credit card judgments and judgments stemming from defaults on promissory notes, automobile loans, installment loans and home mortgages.
The Automatic Stay
All forms of individual bankruptcy feature a provision called "the automatic stay." The automatic stay, or simply the stay, is a legal order that serves as one of the most powerful elements of bankruptcy. Once signed by a judge, the stay ends all garnishments and prevents future garnishment while bankruptcy court takes complete control over the debtor's finances. Emergency bankruptcy filings are possible in one business day, providing quick relief for people facing garnishment.
Alternatives
If you're worried worried about possible garnishments, you should work out payment plans or settlements with debt collectors. Payment plans usually allow the debtor to pay the full amount in monthly payments. Settlement allows for the debtor to pay less than the full balance, often in a lump sum. The debt collector agrees not to pursue court action in both agreements .
Warning
People who choose bankruptcy must follow the terms of their bankruptcy agreement. Otherwise, the judge can dismiss the bankruptcy. Dismissal of a bankruptcy ends the automatic stay and allows resumption of all previous bank or wage garnishment.
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