Wage Garnishment and Bankruptcy in Illinois

What is the relationship between wage garnishment and bankruptcy in Illinois? Many consumers learn that they could have their wages garnished, or receive information about their wages being garnished as a result of a judgment. They also often hear that they may be eligible to stop the wage garnishment by filing for personal bankruptcy. In many cases, filing for consumer bankruptcy can stop a garnishment, but it is important to understand how wage garnishment works and then how bankruptcy laws might stop a wage garnishment.

What is Wage Garnishment?
Many debtors in the Oak Park area have heard of wage garnishment, but confusion still exists about this term. In short, wage garnishment refers to a process of collecting on a judgment against a debtor (although garnishments can also affect companies and other entities) by having that debtor’s employer deduct a certain amount from his or her paycheck. In some cases, garnishment can also affect a debtor’s personal property that is not exempt. That is, a debtor’s wages can be garnished, but a debtor’s other assets also can be subject to garnishment in some situations.

For example, if you owe a creditor money and the creditor files a lawsuit against you and takes you to court, one result of that lawsuit might be a judgment against you that includes wage garnishment. The judgment might clarify that you owe the creditor, for example, $10,000, and it might allow for your wages to be garnished until the debt is repaid. Given that wage garnishment is a process of deducting money from a debtor’s paycheck, it is sometimes known as “wage deduction” or a “wage attachment.”

It is important to know that, under Illinois law, all of your wages cannot be garnished. Both federal and Illinois state laws cap the total amount of the deduction. First, an employer can only deduct a maximum of 15% of a debtor’s gross income (in other words, 15% of the income before taxes or deductions). Then, the deduction cannot result in the debtor having less than 45 times the minimum wage in weekly net pay. Since the Illinois minimum wage is currently $8.25 per hour, that means the garnishment cannot result in the debtor netting less than $371.25. Income from Social Security Disability, retirement benefits, and other government benefit programs are not counted as wages for garnishment purposes and cannot be garnished.

Consumer Bankruptcy and Garnishment
If your wages are being garnished, or if you are concerned that they will soon be garnished, it is possible that filing for Chapter 7 bankruptcy will stop wage garnishment. The automatic stay of the U.S. Bankruptcy Code prohibits creditors from continuing to collect from you, including on judgments. Wage garnishment is a form of collection. As such, the automatic stay stops wage garnishment in most cases.

However, there are some exceptions. For example, the automatic stay cannot stop garnishment for certain back taxes or for child support payments. It is also important to know that, if the debt for which your wages are being garnished is not ultimately discharged in your bankruptcy case, the garnishment usually can begin again after your bankruptcy discharge.

Contact an Oak Park Bankruptcy Lawyer
If you have questions about wage garnishment and bankruptcy, you should speak with an Oak Park bankruptcy attorney about your case. Contact the Emerson Law Firm to learn more about how we help consumers in the Chicago area.



See Related Blog Posts:
Student Debt and Income Share Agreements
Should I Repay Time-Barred Debt?

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