If your employer is deducting funds from your check due to a wage garnishment and you can’t pay your monthly bills, filing a bankruptcy case will offer you some relief. How long that relief lasts will depend on the type of bankruptcy you file and the type of debt the creditor is collecting.
Under most circumstances, when you file a bankruptcy case, an injunction (a type of order) called the automatic stay goes into effect. The stay prohibits creditors from taking collection action against you or your property without permission of the bankruptcy court.
All garnishments are subject to the automatic stay, and the employer should stop removing the garnishment amount from your paycheck as soon as possible after receiving notice that you’ve filed bankruptcy (in most cases, you or your attorney will notify the employer immediately after filing). The stay usually remains in effect until you receive a discharge (forgiveness of your debts) or your case gets dismissed (closed); however, your creditor can file a motion and ask for permission to resume collection activities.
The bankruptcy will probably stop the garnishment permanently for dischargeable debt, such as credit cards, personal loans, and medical bills. Because garnishments for these debts are available only as a collection tool to creditors who’ve gotten court judgments, it might be necessary for your bankruptcy attorney to take additional action to eliminate (avoid) an associated lien to make sure that the garnishment won't come back to haunt you.
If the debt is the type that doesn’t get wiped out in bankruptcy, you can expect the garnishment to continue after your bankruptcy is over. For instance, in a Chapter 7 bankruptcy, the garnishment will likely remain in place for:
For more information about the process, read Chapter 7 Bankruptcy Timeline.
By contrast, under Chapter 13 rules, you’re required to pay most nondischargeable debts in full over the course of your three- to five-year repayment plan. Therefore, if you file a Chapter 13 bankruptcy and complete your repayment plan, you should be free of all garnishments except for a garnishment associated with your student loan account.
Learn more in Chapter 13 Bankruptcy Timeline.