Have you received a notice from your employer that your wages are about to be garnished? Or, was your last paycheck garnished without you even knowing it would happen? In Arizona, a creditor can take up to 25% of your wages through garnishment. So if a garnishment happens unexpectedly, it can seriously hinder your ability to pay your regular bills, like mortgage, rent, or utilities. Therefore, putting an immediate stop to the garnishment may be of critical importance. Luckily, there is a legal procedure that can stop a garnishment immediately—bankruptcy.
Bankruptcy can stop a wage garnishment
The filing of bankruptcy brings into effect the automatic stay, which immediately puts a stop to most collection actions, including garnishments. As soon as the bankruptcy is filed, creditors can no longer take any action to collect a debt from you. If a creditor continues with collection activities after the bankruptcy is filed, the creditor violates the automatic stay, and you can recover damages (money) for the violation. There are some exceptions to this rule. For example, collection of child support is not stopped by bankruptcy. However, collection for most other types of debt must immediately stop. This includes credit card debt, medical bills, payday loans, personal loans, student loans, and judgments based on any of these types of debt. If you are being garnished for one of these types of debt, then as soon as the bankruptcy is filed, the garnishment must immediately cease.
A bankruptcy can be filed on an emergency basis immediately, literally within a matter of hours. In a normal bankruptcy case, all the documents and schedules are prepared before the filing, and can be 50-60 pages long. However, in an emergency case, only a short bankruptcy petition is filed initially, containing only your name, address, social security number, your credit counseling certificate, and some other basic information. The credit counseling course takes 1-2 hours and can be done online or by phone. After the emergency petition is filed, all other documents are prepared in the next 2-3 weeks.
An emergency bankruptcy is particularly useful if you just found out that you will be garnished, and you expect a paycheck in the next two weeks. Filing for bankruptcy before your payday will allow you to avoid losing money to garnishment. Please note that most employers process payroll a few days before paychecks are issued. So, the closer you get to your payday before filing bankruptcy, the more likely it is that your paycheck will be reduced by the amount the employer held back for the garnishment. However, even if this happens, the money will be returned to you, most likely in the following paycheck. In cases we handle, we contact the creditor and the employer to ensure that the money is refunded promptly.
If there is currently no garnishment pending against you, but you have been sued, or you are just concerned about the possibility of garnishment, then you have several additional options available to you. You can find out more about these options in our Ultimate Guide to Stopping Garnishment in Arizona.