When your debts become unmanageable, you face the risk that creditors will take legal action against you, garnishing your wages or levying on your bank account. If you are already subject to a garnishment or you fear that a creditor may seek to attach your bank account, you can stop this action and protect your interests through a bankruptcy filing. Whether you file for protection under Chapter 7 or Chapter 13, an automatic stay immediately goes into effect when you file, preventing creditors from calling, writing or taking legal action against you.
The automatic stay will be in effect throughout the bankruptcy process. In a Chapter 7 proceeding, your debts will be permanently discharged, and your creditor will have no further right to seek recovery from you, once the bankruptcy is final. In a Chapter 13 reorganization, your creditor may not contact you or take any legal action against you (outside of the bankruptcy proceeding) during the term of your repayment plan (typically three to five years). At the end of your Chapter 13 reorganization your debts will be permanently discharged.
Ending Wage Garnishment with a Bankruptcy Filing
Before a creditor can file a request to garnish some of your wages, the creditor must file a lawsuit against you and get a judgment. Before the lawsuit can proceed, you must receive notice that you have been named as a defendant in a lawsuit. If you do not respond to the lawsuit, the creditor can obtain a default judgment. Even if a creditor files for garnishment of your wages, your employer typically cannot withhold more than 10 percent of your paycheck (there are exceptions, though, for child support and tax arrearages). The automatic stay in a bankruptcy stops wage garnishments.
Stopping a Bank Levy
When a creditor attempts to levy a bank account, they obtain a court order directing your bank to freeze some or all of the assets in your bank account. The automatic stay in bankruptcy prohibits your creditor from taking this legal action against you.
Contact John Hargrave & Associates
We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.