Threatened with wage garnishment? Filing bankruptcy may help

For those struggling with debt, a letter from a debt collector threatening to garnish wages can add stress and worry to an already difficult situation. However, wage garnishment is not inevitable and those struggling with debt can prevent debt collectors from dipping into their paychecks or bank accounts.

What is wage garnishment?

Wage garnishment is a debt collection tactic typically used as a last resort by many debt collectors and other creditors to collect credit card and other debts, and can also be used to collect back-owed child support or tax debt.

When wages are garnished, 25% of the net income is withheld from each paycheck and automatically paid to the creditor to help satisfy the debt. This activity will catch the eye of employers, though they are barred from using an employee's first wage garnishment as a reason to fire that employee

Debt collectors cannot garnish someone's entire paycheck. They may only take 25 percent of wages within each pay period or up to 30 times the federal minimum wage of $7.25. While these limits prevent collectors from stripping people of all their income, they are able to take a significant amount of pay that may otherwise go to feeding an individual's family or putting gas in someone's car so he or she can get to work.

How are wages garnished?

A debt collector or creditor cannot garnish wages without first receiving a court order to do so. To get a judgment that allows them to garnish wages, creditors must first file a lawsuit against the individual who owes the debt.

Filing such a lawsuit is usually the last step in an effort to collect the debt. When someone defaults on their debt, their creditors will make attempts to collect it, like sending letters and charging late fees. If these efforts are not successful, creditors will sell the debt to a debt collection agency. One strategy in their debt collection arsenal is filing a lawsuit against people who owe debts to have their wages garnished.

How can someone prevent their wages from being garnished?

Fortunately, those facing wage garnishment have some options that can help them avoid having their wages withheld. Being proactive can be beneficial, including working with creditors to come up with a repayment plan. However, if debt collectors have taken the step to garnish wages, this kind of effort may not suffice.

A more effective option may be to consult with an experienced bankruptcy attorney. He or she can help individuals understand how filing for bankruptcy can put a stop to debt collection efforts and explain an individual's options under Chapter 7 or Chapter 13 bankruptcy. Filers may be able to discharge their debts or create reasonable repayment plans to pay their debts. If you have received a notice of wage garnishment and would like to understand how bankruptcy may help you, contact an experienced bankruptcy lawyer.