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Can bankruptcy stop wage garnishment?

It can be frustrating to watch a portion of your income get taken away through wage garnishment. In Illinois, you do have the option of filing for bankruptcy, which can stop the practice. Keep in mind that this only applies to debts that qualify, which does not include items such as child support or alimony payments.

Typically, a creditor will obtain a court order to collect on a debt through garnishing your wages. That order alerts your employer to withhold part of your paycheck and divert it to the creditor. As Illinois Legal Aid points out, filing for either Chapter 7 or Chapter 13 bankruptcy will create an automatic stay on your debts. Once that occurs, creditors are required to cease collection of your debts, including stopping the practice of garnishment.

The following three circumstances could put an end to the stay on debt collection: 

  • Your debts are discharged or reorganized through bankruptcy.
  • The creditor is successful in asking a court to lift the stay.
  • Your bankruptcy case is dismissed.

In the event that bankruptcy discharges the debt a creditor was collecting on through wage garnishment, your paychecks should no longer be affected. If the stay is lifted or your bankruptcy case is dismissed, the creditor may resume the practice. With a Chapter 13 bankruptcy, your debt is reorganized into a repayment plan, which may be executed through wage garnishment.

When you file for bankruptcy, you are required to make a list of creditors to whom you owe money. Those creditors should then be alerted to the fact that you filed. However, it is good sense to put in writing to those parties that you have initiated the bankruptcy process, thus requiring them to stop wage garnishment.

While this information may be useful, it should not be taken as legal advice.

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