The Effects of Chapter 13 on Wage Garnishment

By Kevin Owen

You may be considering filing for bankruptcy if your indebtedness is so severe that your wages are being garnished by your employer before you receive your pay. If you are eligible to file for Chapter 13 bankruptcy, you may be able to stop wage garnishment and setup a court-supervised payment plan to enable you to emerge from debt.

Wage Garnishment

Under state and federal laws, a creditor can obtain a court order to require your employer to withhold a portion of your pay and turn it over to them directly from your paycheck. Your employer must comply with wage garnishment orders or face penalties. Federal law limits wage garnishment to 25 percent of your paycheck after taxes and other deductions, whereas some state laws may restrict garnishment to a lower percentage of your pay.

Chapter 13 Bankruptcy

In Chapter 13 bankruptcy, your debts are reorganized into a payment plan to be paid over three to five years without requiring you to sell your house, car or other assets. The repayment period is supervised by a court-appointed trustee, who acts as an intermediary to receive and distribute payments to your creditors. Any remaining debts are discharged by the bankruptcy court after the successful completion of your payment plan.

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Automatic Stay

Immediately upon filing your Chapter 13 bankruptcy petition, all debt collection efforts by your creditors are automatically stayed. This prevents creditors from calling you; filing lawsuits to collect owing debts; sending bills and threatening letters; foreclosing on your home; repossessing your car; turning off your utilities; and garnishing your wages. If your employer is already withholding pay because of consumer debt under a judgment, you are entitled to have the wage garnishment immediately stopped by providing a copy of your bankruptcy petition to your employer's payroll or human resources department.

Unaffected Garnishments

Although Chapter 13 bankruptcy ceases wage garnishments placed on your paycheck by most creditors, it does not stop all garnishments. Under the law, your paycheck may still be subject to withholding for child support and alimony payments. Wage garnishment for delinquent payments on federally-funded student loans and outstanding income tax payments are also unaffected by bankruptcy.

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Colorado Rules for Wage Garnishments


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Does Filing for Bankruptcy Stop Wage Garnishments?

It's an unfortunate fact of life: when you're most down on your luck, creditors tend to pile on, demanding payment and using the law to get it. Wage garnishments occur when creditors go to court and get a judgment against you, allowing them to take what you owe directly from your pay. Your employer is legally obligated to withhold a percentage of your paycheck every week and send that money to your creditor, leaving you even more unable to meet necessary living expenses. Federal law protects you against wage garnishment to some extent.


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