Bankruptcy can stop a wage garnishment almost immediately.
Once a bankruptcy is filed there is an automatic stay imposed. This means all collection activity must stop. The automatic stay is effective immediately upon filing bankruptcy. However, notice of the bankruptcy must be given to the proper parties in order to stop a wage garnishment.
Notice is Critical
A debtor in bankruptcy or the debtor’s lawyer must notify the Sheriff’s Levy Department that the debtor has filed a bankruptcy and he or she must provide proof of the open bankruptcy case. Usually, that means providing a Court generated notice of the bankruptcy.
Once the Sheriff’s Levy Department is able to confirm the judgment debtor is in bankruptcy, the Sheriff’s Department mails out a notice to the debtor’s employer instructing the employer to stop the wage garnishment. Debtor’s payroll or HR department must receive notice from the Sheriff’s Department, this is one of the very few ways to stop a wage garnishment.
Requesting the Sheriff’s Levy Department to fax instruction to the debtor’s payroll department is a way to expedite notice and thus stop a wage garnishment timelier.
The Timing of Bankruptcy Matters
The timing of filing bankruptcy can be critical. To stop a wage garnishment from hitting the next payroll, the payroll department must receive the Sheriff’s notice prior to payroll processing the next set of paychecks. If a post-petition wage garnishment happens, usually the Sheriff’s Department will refund the debtor the garnished wages, but this can take 3-4 months.
If pre-petition wages are garnished, it can be more difficult to recover the funds. If a judgment creditor submits a termination letter to the Sheriff’s Department, then the Sheriff’s Department may release the funds back to the debtor. However, if a judgment debtor wants to stop a wage garnishment it is best to file bankruptcy sooner rather than later.
Complete your Bankruptcy
Assuming the debtor filed a chapter 7 bankruptcy, it is important the debtor receives his or her discharge order. All debts are still owed until the debtor receives the discharge order. If a judgment debtor files bankruptcy but does not complete the case successfully, then once the bankruptcy is dismissed or closed the judgment creditor may pursue debt collection activity including future wage garnishments. It is imperative the debtor receives a discharge order to prevent this from happening.
Conclusion
To stop a wage garnishment, file bankruptcy. All debt collection must stop immediately. Proper notice to the appropriate parties is critical. The timing of bankruptcy matters. Hire an experienced bankruptcy attorney to ensure the case is done right and to ensure a discharge order is entered by the bankruptcy court. The discharge order is a federal court order discharging most pre-petition debt. This prevents any future wage garnishments against the pre-petition discharged debt. Learn more about bankruptcy here.
Published: September 13, 2019