Stopping Judgements and Wage Garnishment with Bankruptcy

Stopping judgments and wage garnishment with bankruptcy may be the best option if people can’t make payments or creditors won’t make payment arrangements. Usually, judgments occur when people default on their accounts such as rental agreements and credit cards and creditors file lawsuits. If creditors receive a judgment it means they’ve won and have a legal right to go after people’s earnings, also called wage garnishments. People’s employers must take out up to 25 percent of money from their weekly, bi-weekly or monthly paychecks and give it to the creditors. However, judgments and wage garnishments must cease once people file for bankruptcy.

Bankruptcy Stops Judgments and Wage Garnishments with an Automatic Stay

When people file for bankruptcy the U.S. Bankruptcy Court grants an automatic stay—even before the bankruptcy cases are heard by bankruptcy trustees or approved by bankruptcy judges. What the automatic stay means for people with judgments or wage garnishments against them is that creditors are prohibited from filing or pursuing lawsuits and taking money out paychecks.

U.S. Bankruptcy Court Gives People Two Options

For people with regular income, chapter 13 can be their best option. Chapter 13 gives individuals the opportunity to avoid judgments and wage garnishments and repay their debts. For instance, individuals will have to make monthly payments to the bankruptcy trustees for a period of three to five years.

However, people without regular income can still stop wage garnishments and judgments. They can file for chapter 7 bankruptcy. With chapter 7, individuals can have their debts permanently eliminated, commonly called bankruptcy discharged. Chapter 7, however, may come with some disadvantages. For example, people with property the bankruptcy trustees deem exempt may have to turn over that property to the trustees. The bankruptcy trustees will sell the property then give the proceeds to the creditors as payment.

Seek Legal Assistance

According to Gina H. McDonald & Associates, a bankruptcy lawyer can help people eliminate all garnishments, judgments and even liens. A bankruptcy lawyer will go over the bankruptcy laws with people and discuss their financial situations. For instance, a bankruptcy lawyer may determine that people without regular income are judgment proof. That means that if creditors obtain a judgment they can’t collect because there’s no money to collect. However, if people do have regular income a lawyer will file the appropriate bankruptcy paperwork and get people on the road to financial recovery.

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