Wage Garnishments: When Bankruptcy Can Help and When It Cannot

Woman Signing On Check Over Table — Overland Park, KS — Wiesner & Frackowiak LC

Anyone struggling to pay their bills will struggle even more if their wages are garnished. The law allows creditors to extract money from wages after they receive a court order, regardless of the individual’s other debts. The payments can come from any earnings, including commissions, worker’s compensation, and bonuses.

Employers face penalties if they refuse to remove these payments from a paycheck or other compensation. In Kansas, employers could receive a fine of $500 or more and become liable to the creditor for legal fees and an amount three times the original debt amount.

If a creditor is garnishing your wages, a bankruptcy filing will halt the garnishment with exception to child support and alimony. It is often the best option available. Keep reading to learn what bankruptcy can and cannot do for you.

Manage Various Unpaid Debts

Unpaid debts like loans, utility bills, and car payments could lead to wage garnishment. Creditors will sometimes go to court to get the approval to garnish wages. The amount the court approves for the garnishment could be much more than the debtor can afford.

Filing bankruptcy causes an automatic stay on the garnishment order, so the debtor gets their full wage while the bankruptcy court decides the case. Automatic stays can occur with many expenses, but they are not possible with all debts. Some garnishments, like child support and alimony payments, must continue despite a bankruptcy filing.

A debtor can only receive a discharge on the debts they list for the court, so if you don’t list all your debts during their bankruptcy filing, you could have your wages garnished again in the future.

Relieve Some Tax Burdens

Wage garnishments may also occur because of unpaid income taxes to the Internal Revenue Service. Only income taxes that are over three years old may qualify for a discharge. The court will not discharge the debt for a tax debt and any related fines that are less than three years old.

Taxpayers may stop paying some debts (like overdue credit cards or payments on a car loan) when they file bankruptcy, but they cannot stop filing and paying their tax debts. Failing to file and pay as expected could cause a dismissal of the bankruptcy case.

Make Child Support Easier

As mentioned earlier, bankruptcy will not stop wage garnishments related to child support. The court will also not discharge the debt. However, while bankruptcy may not eliminate the payments, it can rid people of other overwhelming debt. The freedom from other financial obligations makes it easier for many people to pay the child support they owe.

Call Wiesner & Frackowiak, LC Today

Wage garnishment laws can vary. Talk to an attorney if you cannot continue to pay your basic living expenses and cover your debts while a creditor garnishes your wages. You have options, and we want to help you learn more about what choices are available to you. Contact Wiesner & Frackowiak, LC, today to schedule a free consultation. We’re ready to help you gain your financial footing.

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