For many Indiana citizens, wage garnishment can worsen an already difficult financial situation. When a portion of your salary is taken to pay a debt, it becomes harder for your family to afford necessities such as rent, utilities, and food. Bankruptcy can come to the rescue in such cases, providing a needed lifeline to financial stability.
Understanding wage garnishment in Indiana
Wage garnishment involves a situation where a creditor has a court order enabling it to withdraw cash from your wages. Creditors in Indiana frequently file for garnishments to recover debts that arise from credit cards, healthcare services, personal loans, and others.
Indiana statutes impose restrictions on how much creditors can recover via wage garnishment. For the most part, creditors can withdraw the smaller amount from the following:
- 25% of the individual’s disposable wages; or
- The difference between his weekly wages and thirty times the hourly minimum wage in the United States.
Despite all that, wage garnishment remains financially burdensome to employees.
How does bankruptcy stop wage garnishment?
In cases where an individual declares bankruptcy, an automatic stay comes into effect. This is a judicial action that places an immediate prohibition on most collection actions against the debtor. These actions can include garnishment, bank levy, or the placement of a lien on your property.
As soon as the bankruptcy petition has been filed, all creditors are expected to stop garnishing the debtor’s wages. In most cases, they are informed instantly, and this prevents further deduction of their salaries.
Automatic stays can be used in either Chapter 7 or Chapter 13 bankruptcies.
Chapter 7 bankruptcy and wage garnishment
Chapter 7 bankruptcy is aimed at wiping out a large number of unsecured debts. These include credit card debts, medical bills, and personal loans. If one’s garnishment is related to their dischargeable debts, then Chapter 7 might offer permanent protection against it.
After the debts have been discharged, the creditor cannot continue collection efforts or garnish wages from you anymore. This will help you get rid of a huge burden of unsecured debt.
Not all garnishments can be removed through Chapter 7 bankruptcy. Some debts, like child support payments, recent tax liabilities, and almost always student loans, will persist even after bankruptcy.
Chapter 13 and wage garnishment
A Chapter 13 bankruptcy will entail a repayment plan that is approved by the courts, lasting three or five years. Chapter 13 could help those with delinquent secured debt, such as car or mortgage loan obligations.
With Chapter 13, however, a court will not allow the garnishment of wages. Rather than creditors directly deducting funds from your paycheck, you make the repayments as part of your bankruptcy schedule.
Chapter 13 bankruptcy can assist you with making overdue mortgage payments or avoiding foreclosure while still retaining your income and possessions.
Talk to a Danville, IN, Bankruptcy Lawyer Today
Chris Arrington represents the interests of those who need to file for bankruptcy in Indiana. Call our office today to schedule an appointment, and we can begin discussing your next steps right away.