If you’re dealing with a wage garnishment or bank levy, it’s fair to wonder if filing for bankruptcy can give you relief from these financial burdens. In this blog we’ll explore the relationship between bankruptcy and wage garnishments/bank levies in civil litigation cases.
When a judgment is entered against you in a civil litigation case, creditors may look to collect the money owed through wage garnishments, or levies on your bank account(s) and other assets. However, bankruptcy can offer a legal remedy to stop, or reverse the collection efforts of a garnishment or levy.
When you file for bankruptcy, an automatic stay goes into effect right away. This legal injunction halts most collection activities, including wage garnishments and bank levies. Creditors are prohibited from continuing these actions while the bankruptcy case is pending.
Bankruptcy gets a bad reputation, but it is a great tool that was designed to help people get back on their feet and out of difficult financial situations. If you are considering filing for bankruptcy to stop a wage garnishment or a bank levy, it’s important to consider which type of bankruptcy is the right one for you. A Chapter 7 bankruptcy involves the liquidation of non-exempt assets to repay creditors, often providing a fresh start for individuals with limited income or significant unsecured debts, while a Chapter 13 bankruptcy sets up a structured repayment plan over three to five years. A Chapter 13 bankruptcy would allow individuals with a regular income to keep their assets and gradually pay off portions of their total debt. Both types of bankruptcies would stop a wage garnishment or bank levy, but they do not get approved automatically. Factors such as the means test, income and expenses, assets and exemptions, debt composition, prior bankruptcies and more all factor into if a bankruptcy will get approved.
While bankruptcy can be a powerful tool to regain financial traction and aid you against wage garnishments and bank levies, it’s important to know which bankruptcy is right for you and what actions you need to take so that your bankruptcy filing gets approved by the court. Because bankruptcy is a highly complicated area of law, we strongly recommend consulting with an experienced bankruptcy attorney before filing anything with the court. The benefits of bankruptcy can be a lifesaver to your situation, but making a mistake on your application can get your bankruptcy rejected and complicate future filings, and depending on the judge, delay your ability to re-file for bankruptcy.
