Garnishments are a legal actions enforced by the court to allow creditors to collect on outstanding debt. The most common is wage garnishment when funds are deducted from paycheck earnings. Bankruptcy may stop pending and active garnishment activity against you. When bankruptcy is filed an action called the automatic stay goes into effect. The stay prevents further collection attempts from creditors. But what happens when you notice your earnings are still being garnished after your petition has been filed?
When you file bankruptcy your creditors are notified of the filing. Creditors who receive notice are supposed to stop collection efforts. There are potential consequences creditors may face if they continue collecting. Yet, there are factors to review to understand if the creditor violated the bankruptcy code.
In proving if the creditor willfully violated the automatic stay, you need to prove the creditor knew the stay was in effect. You also need to prove their ongoing collection actions were intentional. If you present your case to the court they may award you punitive damages if they find the creditor purposely continued garnishing your earnings.
The timing of your bankruptcy may also play a role in whether you can get garnished funds returned to you. In some cases, a certain amount may need to be garnished before you can collect. Paycheck earnings up to 25 percent may be garnished, but garnishing laws vary state by state. Garnishing may be approved for back child or spousal support, with bank accounts also subject to garnishment.
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