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If you're deep in debt and are being squeezed financially by debt collectors, one of the tools in their arsenal they like to threaten you with is wage garnishment. If you’re considering bankruptcy, not only can it address your debt dilemma but can also vanquish your garnishments! A wage garnishment order is not only a financial problem but because it is a payment demand sent to your employer, it can be a source of embarrassment. And if you are subject to several garnishment orders, this can even cause you to lose your job!
For those lucky enough to live in North Carolina, you should know you live in a state that does not easily allow for wage garnishments to be levied for debt collection purposes to begin with – another boon to living in the state! Child support, taxes and defaulted student loans are more likely to be approved for wage garnishment, but it isn’t widely available as a means to pursue consumer debt as it is in most other states. But wage garnishment isn’t the only type of garnishment available, so collectors pursuing NC residents still have other options.
First, a creditor must go to court to get a judgment against you. With the judgment in hand, what’s more likely than is that they will pursue garnishment of your bank account rather than your wages. Second, a creditor may try to get a wage garnishment order against you issued by another state and then send it to your employer to withhold from your wages. A wage garnishment order from out of state may be enforceable within North Carolina.
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Fortunately, when you file for bankruptcy – either Chapter 7 or Chapter 13 - an automatic stay goes into effect which means creditors must stop all collection activities immediately. This stay will be in place for a pre-determined length of time depending on the type of bankruptcy you file and your circumstances. Creditors are typically very respectful of bankruptcy guidelines and immediately stop collection efforts - including wage or bank garnishment - because they know there are serious consequences for non-compliance.
The automatic stay bankruptcy offers can trigger three different results:
1. If you receive a discharge of the debt the garnishment related to then the creditor will not be able to resume garnishment after bankruptcy.
2. If your case was dismissed without discharge, the creditor can resume garnishing your wages.
3. If the creditor files a motion to lift the stay and satisfies the court as to the reason why the stay should be lifted it will be lifted and garnishment will continue.
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Sometimes the automatic stay may be limited. These circumstances include:
- Student loans cannot generally be discharged during bankruptcy unless you pass the Brunner test. Bankruptcy will typically not be able to put an end to student loan garnishment unless you can successfully have your debt lowered or discharged by filing an adversary proceeding.
- Child support and alimony garnishments do not qualify for the automatic stay nor can they be discharged or reduced by bankruptcy. If your income has dropped and you can’t afford the set payments, you will have to seek a modification in family court rather than bankruptcy.
- If you file bankruptcy at least twice in one year, your automatic stay will last only 30 days. If you want it to last longer, you can have your attorney file a motion and the court will consider the request and your circumstances and decide whether or not to allow the stay to stick.
Garnishment, as with any debt dilemma, is best handled before it gets to this drastic stage. If you owe more than you can afford to pay and you know your situation is not likely to improve, filing bankruptcy sooner rather than later may prevent extreme debt collection tactics like garnishment. For help with your debts, contact the law offices of John T Orcutt for expert advice on North Carolina bankruptcy.