Wage garnishment is a process used by creditors to take a portion of your paycheck after obtaining a court judgment for money owed. The debtor’s employer is required to notify the employee of the garnishment and to obey the order or face a fine or even imprisonment in extreme cases.  Generally, creditors only use this process as last resort when negotiations or other demands for payment of a debt have been exhausted. 

With some exceptions, Federal law limits the percentage of a debtor’s disposable earnings that can be garnished to 25 percent, or the amount by which the debtor’s weekly wage exceeds 30 percent of the federal hourly minimum wage, or whichever amount is lower. Also, a state’s maximum limit may be less than the federal limit and takes precedence.  Moreover, if your wages are garnished for domestic support orders, the amount garnished could be considerably more.

A wage garnishment can be an embarrassing situation and can continue until the debts are paid or until another agreement is reached.  Fortunately, you can avoid this embarrassment by filing a Chapter 7 or a Chapter 13 bankruptcy.  Once the bankruptcy is filed, section 362 of the bankruptcy code imposes an automatic stay of all civil proceedings, including your wage garnishment, and may discharge the garnishment.

If a creditor wants to resume collection, it must ask the court to lift the stay.  The court will only lift the stay if it has a valid reason to do so.  However, the automatic stay will not apply to domestic support obligations such as child support or spousal maintenance.

Once you receive the discharge and the underlying obligations for the wage garnishment was included in the discharge, the creditor can no longer resume the garnishment to collect the debt.  If your case is dismissed without a discharge, then the creditor can continue the wage garnishment.

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