Filing for bankruptcy is an excellent way to stop wage garnishments. The automatic stay immediately stops all collection actions, and the discharge wipes out the judgment debt.
However, as any quality bankruptcy attorney will tell you, filing for bankruptcy requires some time and work. If you want you case done properly and without errors, you should expect that the process will take a couple of weeks, minimum. In other cases, people need to deliberately wait to file their case for any number of reasons.
But you’re facing a wage garnishment NOW. What can you do to avoid wage garnishment until your bankruptcy case is ready to be filed?
Let’s start out with some basic facts that you should know about wage garnishment. Note: everything in this post is specific to Wisconsin law. If you have been sued in another state, consult with an attorney who practices in that state.
- The maximum amount that can be garnished is 20% if your “disposable earnings” (your gross wages, minus amounts taken out for federal tax, state tax, and social security taxes, but does not include other deductions such as insurance or union dues). If you have child support deducted from your paycheck, then the combined amount of child support deductions and the wage garnishment can be no greater than 25% of your disposable earnings.
- Garnishments typically last for 13 weeks. They can end sooner if the underlying debt is fully paid. They can be extended for a longer period either by stipulation, or by a new application that takes effect after the first 13 week period is up. Also, public employees can be garnished until the debt is paid off.
- You can only be garnished by one general creditor at a time (does not include tax levies, federal student loan levies, and child support).
- You cannot be fired solely because of a wage garnishment (though most employment in the United States is “at-will” employment, which means an employer can fire you for any reason or no reason at all, so long as it is not solely for a discriminatory reason). There is also an exception to this rule if you have a collective bargaining agreement that permits termination under such circumstances.
- You may dispute a wage garnishment. To do so, click here for the form. Send a copy to the Clerk of Courts, the creditor and/or the creditor’s attorney, and your employer. Your employer must not garnish you if you file one of these responses, unless and until the court overrules your application and directs the employer to proceed with the garnishment. Your employer must wait at least 5 days after your pay date before sending garnished funds to the creditor, to allow time for you to file a dispute.
- Most creditors cannot touch certain types of income (such as social security). However, if you owe debt to the government, social security and other types of income can become fair game.
You may be exempt from wage garnishment. If you are, make sure that you file a response with the court and copy your employer. Your employer is not required to investigate on his own to determine whether or not you are garnishment-proof. All exceptions (except proof of bankruptcy filing or discharge) require a judicial determination.
You may be garnishment-proof if:
- You have filed bankruptcy and the automatic stay is still pending. (In pending Chapter 13s, only until property of the estate revests back to you.)
- You have received a bankruptcy discharge, and the debt was incurred before your bankruptcy case was filed.
- Your household income is below the federal poverty guidelines.
- If your household income is above the federal poverty guidelines, but the garnishment would bring you below the guidelines, you can only be garnished to the extent that it brings you down to the poverty guidelines.
- Currently, or in the past six months, you have received – or determined to be eligible for – public assistance (food stamps, W2, SSI, etc.).