Bankruptcy lawyers get asked this question a lot. Does filing bankruptcy stop garnishments?
In actual fact, the proper term for taking money out of your paycheck is wage deduction procedure. It probably does not matter what it is really called because when you are getting money taken out of your pay, it hurts. You just want to know if it stops when you file for bankruptcy.
A creditor cannot automatically garnish your wages unless and until they have a) a judgment awarded against the debtor and b) have filed a Wage Deduction Affidavit in court outlining that you owe them money. That affidavit has to certify they sent you a wage deduction notice letting you know they will be garnishing your wage for the debt owed.
When the affidavit is filed by the creditor, it is filed with a set of written questions that are sent to the employer as well. These are sent to allow the creditor to figure out how much money the employer owes the debtor and to determine the right amount of money to be deducted.
Once the employer gets the questions, they must file them with the court and ensure a copy of their answers go to the debtor and creditor. When that is complete, the court issues a summons to the employer for a court date finalizing how much and when your wages will be garnished.
This is really a painful process for many and something to avoid. If you want to know more about it, call an experienced Iowa bankruptcy lawyer and start asking questions about this and other bankruptcy processes. It is an eye-opener, but it is better to be aware of the consequences of your actions than not.
Here is where things get sticky. There is another kind of garnishment that most people do not know about. It is called the non-wage garnishment, and in that process, creditors may take some types of bank accounts or receivables to collect on the debt owed them. You may hear this referred to as a levy in some places. This information comes as a nasty surprise to people when they discover a creditor has been into their bank account(s).
Again, creditors cannot just institute a non-wage garnishment without following a process similar to the wage deduction procedure. But once the process is started, you have to know they are serious about collecting on their debt. And something else to know is that in a number of states, if a creditor does make a move on a bank account, the bank must freeze assets up to twice the amount of the judgment. That means your money is frozen until your case is sorted out.
So back to the question about how filing for bankruptcy can stop garnishments. The instant you file, the automatic stay kicks in and halts certain lawsuits, foreclosures, evictions, collections harassment and garnishments. For further information, speak to a qualified Iowa bankruptcy lawyer.