Can Bankruptcy Stop Wage Garnishment in Michigan?
Finding out that your paycheck is being garnished can be overwhelming. Losing a portion of your hard-earned wages can make it difficult to pay your mortgage, rent, utilities, and other everyday expenses. Fortunately, for many Michigan residents, filing for bankruptcy can provide immediate relief and stop wage garnishment.
How Does Wage Garnishment Work?
A wage garnishment occurs when a creditor obtains a court judgment against you and receives an order requiring your employer to withhold part of your paycheck to pay the debt. In Michigan, creditors may garnish a portion of your disposable earnings, subject to federal and state limits.
Common reasons for wage garnishment include:
- Credit card debt
- Medical bills
- Personal loans
- Deficiency balances after repossession
- Certain civil judgments
Some debts, such as child support, alimony, student loans, and certain taxes, have special garnishment rules.
Can Bankruptcy Stop a Garnishment?
In most cases, yes. The moment a bankruptcy case is filed, an automatic stay goes into effect. The automatic stay is a federal court order that generally prohibits creditors from continuing collection efforts, including wage garnishments.
If your wages are being garnished because of credit card debt, medical bills, or other unsecured debts, the garnishment usually stops as soon as your bankruptcy attorney files your case.
Your employer should receive notice of the bankruptcy filing, and the creditor must cease collection activities.
Chapter 7 vs. Chapter 13
Both Chapter 7 and Chapter 13 bankruptcy can stop wage garnishments.
In a Chapter 7 bankruptcy, many unsecured debts can be discharged entirely, eliminating the debt that caused the garnishment in the first place. Chapter 7 cases typically last about three to four months.
In a Chapter 13 bankruptcy, you enter into a court-approved repayment plan lasting three to five years. This option can help individuals who have regular income and need additional protection for assets or who have fallen behind on secured debts like a mortgage or car loan.
Timing Matters
If your wages are currently being garnished, waiting can be costly. Every paycheck that is garnished reduces your ability to catch up on other financial obligations. In some situations, money garnished shortly before a bankruptcy filing may even be recoverable, depending on the circumstances.
The sooner you speak with an experienced bankruptcy attorney, the more options may be available.
We Can Help
If you’re facing wage garnishment in Michigan, you do not have to handle it alone. Bankruptcy can often provide immediate relief and a fresh financial start. At Russell Law Firm, PC, we help individuals and families understand their options and develop a strategy to protect their income and financial future.
If your paycheck is being garnished or you’re worried that a garnishment may be coming, contact Russell Law Firm, PC, for a consultation to discuss whether bankruptcy may be the right solution for you.