We are fortunate that Texas is one of the few states in the nation that generally doesn’t permit the garnishment of wages in consumer debt collection. But there still ARE major exceptions in which wage garnishment CAN happen:
- child support and alimony
- federal taxes
- student loans
- out-of-state employers
- out-of-state judgments entered against you
- wages deposited into a bank account, including by automatic deposit
If you file either a Chapter 7 or Chapter 13 case, doing so will immediately stop most garnishments, either temporarily or permanently.
GARNISHMENTS THAT BANKRUPTCY WILL NOT STOP IMMEDIATELY
Regular monthly child and spousal support obligations being paid through a wage order are not stopped by a bankruptcy filing. Bankruptcy does not affect those kinds of debts, and so you must continue paying them. But if you fell behind and now owe back payments being collected through wage garnishment, then how those are affected depends on the kind of bankruptcy you file. Chapter 7 will not stop the garnishment of back support, but Chapter 13 will. A Chapter 13 payment plan must earmark enough money to pay off any back support before it is completed. As long as you keep making your plan payments on time AND keep current with any ongoing support, garnishment of your wages for the back support will stop, permanently.
GARNISHMENTS THAT BANKRUPTCY WILL STOP ONLY TEMPORARILY
Except for the support and alimony obligations just discussed, your bankruptcy filing will stop virtually all other garnishments through the power of the automatic stay. That’s the law that immediately goes into effect when your bankruptcy case is filed and stops virtually all collection activity against you and any of your property.
But the automatic stay is effective only as long as your bankruptcy case is open. That is generally only for about three months in a regular Chapter 7 case. With debts that are discharged – legally written off – in that Chapter 7 case, that’s fine because there can be no further collection of that debt, including no further garnishment. Since most conventional consumer debts are discharged – including debts related to out-of-state judgments or being collected through out-of-state employers – garnishments should not resume on those.
However, certain special debts – many (but not all) taxes and virtually all student loans – are not discharged in Chapter 7, so garnishments to collect on those obligations can resume as soon as that case is finished.
PERMANENTLY STOPPING IRS AND STUDENT LOAN GARNISHMENTS
With taxes, a successfully completed Chapter 13 case would permanently stop garnishments. That’s because a Chapter 13 will on one hand discharge certain tax debts, and on the other hand require you to pay off – through your court-approved payment plan – the remaining tax debts that are not being discharged. So at the completion of your Chapter 13 case, you would owe no more taxes and you’d have no more debt to garnish.
Student loans are more complicated. They are quite difficult to discharge since they can be discharged only in situations of serious, extended hardship. And that has to be established through a lawsuit proving that hardship. Only if that level of hardship is established and the debt is discharged will there be no further garnishment after your case is completed.
But getting a hardship discharge is rare. If that doesn’t happen, the student loan creditor will be able to resume garnishments as soon as either the Chapter 7 case or the Chapter 13 one is completed.
Wage garnishments can definitely be complicated, even in Texas where they are not nearly as common as in most other states. If you are in the Dallas-Fort Worth area, please contact us at The Law Offices of Roger Fuller so we can show you how to get the best use out of the automatic stay to meet your unique needs. Schedule your free and confidential consultation either by calling 214-516-6187 or by reaching us here.