Can Bankruptcy Stop Wage Garnishment in Texas?

If you’re having your wages garnished, it’s important to understand what the consequences will be of declaring bankruptcy. The information that follows is general, and you will want to talk with the bankruptcy attorney in Dallas to get detailed information that is specific to your unique situation.

Can Bankruptcy Stop Wage Garnishment in Texas?

The short answer here is: yes or no. When you file for chapter 13 or chapter 7 bankruptcy, federal law requires that an automatic stay be put on your wage garnishment. This is not a permanent situation, but it has the potential to be. This stay doesn’t just affect your wage garnishments. It also halts all collection activity against you. That means no collectors and no creditors can either continue your property or continue pursuing the repossession of your property. This includes disconnecting your utilities, foreclosing on your home, repossessing your car or other property, and pausing all civil litigation against you for the purpose of debt collection. The stay must be specifically lifted to begin legally garnishing your wages once again. This is just federal law, and there’s more to this when it comes to state law and the specific details of who is garnishing your wages and why.

Texas doesn’t allow many creditors to garnish your wages. Personal loans, medical bills, credit cards: none of the entities collecting these debts are permitted to garnish your wages. You are only subject to wage garnishment for unpaid taxes, alimony or child support, federal student loans, and any federal loans that you have defaulted on. Even if you do have wage garnishment, it only applies to your wages beyond a certain amount. A large proportion of your income is actually protected by law here in Texas. Also, much of your property is protected from creditors, including much of your home equity, retirement accounts, and personal property and other assets up to a specific amount.

How Filing for Bankruptcy Works on Wage Garnishment

Bankruptcy can be the right choice for many people in serious financial difficulties, but it’s important to know that consumer debt collectors, such as credit card companies, are not permitted to garnish your wages here in Texas, anyway, and the other types of garnishments, like taxes and child support, may not be germanely affected by bankruptcy. If you’re unsure whether a bankruptcy will protect you from a particular type of wage garnishment or whether you might be protected already, a bankruptcy attorney in Dallas can give you more information.

Chapter 7 Bankruptcy

If you qualify for this type of bankruptcy, you’ll get that automatic stay to stop your wage garnishment. However, after that stay, the garnishment might resume under certain circumstances, if it is for taxes or child or spousal support. Texas is particularly strict when it comes to garnishment for child support. The state authorizes up to 50% of your disposable income as eligible for garnishment, if you have other dependents, and as much as 60% if you don’t. Also, the federal government overrides state law, so if you have federal debt, such as for taxes, that will always be garnished regardless of what Texas law protects you from.

What you are protected from under chapter 7 bankruptcy is collection agencies who may go after you for unpaid credit card bills, medical bills, or personal loans. Be aware, however, that there are other avenues open to these creditors, such as seizing a savings account or putting a lien on your property. It’s important to negotiate with these entities during the process of your bankruptcy to avoid any of these situations.

Student Loans and Medical Bills

Your wages can be garnished for student loans at the rate of up to 15% of your disposable income, even without a court order to that effect. This is only the case if it’s a federal student loan, though. If you have a private student loan, the holder of your loan must sue you and get a judgment before they’re allowed to pursue garnishment.
When it comes to medical bills, these fall under the category of “consumer debt.” This means Texas law does not allow your wages to be garnished to pay medical bills, but it is possible for you to be sued and for liens to be placed on your property or bank accounts. Again, it’s best to talk to your lawyer about how to negotiate.

Chapter 13 Bankruptcy

If you qualify for Chapter 13 bankruptcy, you will also get that automatic stay to stop all wage garnishment. But then, working with your lawyer, you have to propose a repayment plan that allows you to catch up on your missed payments over the course of the next several years. That plan will very often include paying off the debts for which your pay was being garnished.

Frequently Asked Questions About Wage Garnishment

Can Someone Garnish My Wages Without Notice?

In general, you must be given notice for all wage garnishment. However, garnishment for specific obligations related to taxes or federal student loans are an exception. You may not get any advance notice on these with federal agencies.

That doesn’t mean you will be kept in the dark entirely. Even if garnishment begins immediately, they are required to send you a notification that explains the garnishment as well as your rights. Your rights do include the right to dispute the garnishment or request a hearing to amend it, so talk to your lawyer if you want to do so.

Will Wage Garnishment Automatically Stop Once I File for Bankruptcy?

Yes, once you file for bankruptcy, your wage garnishment should stop automatically. It will resume once you’ve worked out the details of your bankruptcy, but for the moment, you should be in the clear. Wage garnishment also stops once you’ve paid off a debt, once your court order for child support ends or your child becomes an adult, and, for federal debts and taxes, once you have paid them in full or you’ve reached an agreement to resolve the debt.

Your Bankruptcy Attorney in Dallas

Here at Pelley Law, we have more than 80 years of experience in helping people deal with bankruptcy so they can turn their lives around and get a fresh start. In every case, we have three big goals. The first is to protect your property, and almost all of our clients are able to keep their assets. We do everything we possibly can to minimize liquidation so that you can keep your debt manageable, while also hanging on to what’s yours. Our second goal is to eliminate your debt. We can get nearly all our clients free of their unsecured debts, such as credit card debt, and we can stop the efforts of creditor collection agencies so that you can get some relief and pay down your debt with a manageable plan.

Finally, our goal is to rehabilitate your credit score so that you can quickly get back on track. The faster we get started, the more quickly you can take charge of your life again. Contact the Pelley Law Office, LLP today in Plano, Dallas, or Sherman, TX for more information.

Contact Our Texas Bankruptcy Law Firm For Help Today

If you’re facing bankruptcy in Texas, we’re here to help. Contact the experienced bankruptcy lawyers at Pelley Law Office, L.L.P., today to schedule a free consultation.

We proudly serve Plano, Dallas, Sherman, and the surrounding areas.

Pelley Law Office L.L.P. – Plano Office
Address: 1312 14th St, Plano, TX 75074
Phone: (972) 608-0335
Hours: 24/7

Our firm is located near you. Find us with our GeoCoordinates: 33.0180322,-96.6952916,863

Pelley Law Office L.L.P. – Sherman Office

Address: 905 N Travis St, Sherman, TX 75090
Phone: (903) 813-4778
Hours: 24/7

Our firm is located near you. Find us with our GeoCoordinates: 33.6445846,-96.6113141,857