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Filing for Chapter 7 bankruptcy stops wage garnishment

Deciding whether to file for bankruptcy is a difficult decision that is influenced by many factors. If debtors want to stop wage garnishment, they may decide that filing for Chapter 7 bankruptcy is the best course of action. A benefit of Chapter 7 bankruptcy is that once filed, an automatic stay is imposed on creditors, which prevents them from continuing collection actions during the bankruptcy case.

After a creditor sues a debtor in court and receives a money judgment, they may then obtain a court order allowing for the garnishment of the debtor's wages. Each pay period, a portion of the debtor's wages will be garnished to pay the creditor. Most wage garnishments, not including child support collections, will be stopped once the debtor files for Chapter 7 bankruptcy.

However, if the debtor previously had a bankruptcy filing dismissed within a year of their current filing, the stay will only last for 30 days, unless the debtor asks the court for an extension and can prove that the second filing was made in good faith. If the debtor previously filed for bankruptcy twice in the same year, the third filing will not trigger the automatic stay, unless the court grants the debtor's request to impose the stay.

Once the bankruptcy case ends, so will the automatic stay. However, one possible outcome of the bankruptcy case is that the wage-garnishment debt is discharged. If that is the case, then the wage garnishment cannot continue for that debt. There are even certain circumstances in which a debtor may be able to recover wages garnished no more than 90 days prior to the bankruptcy filing. Debtors should send notice of their Chapter 7 bankruptcy to their employers and their creditors to ensure that the wage garnishment is stopped immediately.

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