There are a number of consequences you can face for falling behind on your debt obligations. You could experience financial problems due to a wage garnishment. This is where the creditor obtains a judgment and then attempts to collect on that judgment through a garnishment on your wages. With federal student loans, past due taxes and child support, a judgment is not necessary. The latter examples are cases that involve government entities.
Not only are wage garnishments embarrassing because your employer finds out, a fairly decent chunk of your pay may be withheld to satisfy the debt.
You may have a couple of options for stopping a wage garnishment for debts. Bankruptcy and negotiating with the creditor are two possible options for getting rid of a wage garnishment.
How Filing for Bankruptcy Can Stop a Wage Garnishment
Bankruptcy can halt credit collection attempts, including wage garnishments, because an automatic stay is issued when you file for bankruptcy. For as long as the automatic stay is in effect, most creditors cannot continue garnishing your wages. This gives you time to get caught up on more important debt obligations, such as your mortgage or vehicle payments.
Creditors may face consequences for violating the automatic stay. Your attorney can advise you on how to respond if a creditor violates the order by continuing a wage garnishment.
Chapter 13 bankruptcy is an option you might want to consider if a wage garnishment is causing major financial harm and you are facing additional creditor collection actions. If your assets are at risk, then you should speak with a bankruptcy attorney as soon as possible.
Negotiate With the Creditor
You can also negotiate with creditors (although if they are represented by attorneys you may be required to contact the creditor’s attorney) in some cases, even the IRS. Creditors may allow you to negotiate a payment plan or lump sum payment to stop a garnishment. Any such agreement, in order to be effective, must be agreed to by BOTH parties. However, you would have to contact the creditor to determine whether this option is available. Negotiating installment payments or a lump sum payment may not be possible for all types of debts.
You may also be able to challenge the creditor’s proposed wage garnishment in some cases. If you have sufficient evidence the wage garnishment is unlawful, then you may have luck stopping the garnishment.
Which Bankruptcy Chapter is Right for Me?
Most consumers file Chapter 7 or Chapter 13 bankruptcy. Chapter 13 bankruptcy sets up a payment plan that lasts for three to five years. You can use this option if you have a source of income that is sufficient for meeting the payment plan’s requirements, so it is a good option for those who are experiencing extreme financial hardship due to a wage garnishment.
Bankruptcy can help protect the assets that matter to you most. Once your case concludes, you may receive a discharge on your debts. Debts discharged in bankruptcy are tax-free, as opposed to other options like debt settlement negotiation.
Call Our Kansas City Bankruptcy Lawyers for Help With Creditor Collections
Our Kansas City bankruptcy law firm has $0 up-front Chapter 13 filing fee options. You can call us at (816) 281-6349 to learn more about these options and how bankruptcy may help resolve your difficult financial situation.