Stopping Garnishments, Lawsuits, Levies and Liens

Understanding Judgment Debt Collection

Creditors who have sued and taken a judgment against you can collect their judgment in three ways:

  • Garnishment: Wage garnishment occurs when the state court where you have been sued orders your employer to take out up to 21% of your take-home pay and send it to the court to pay to your judgment creditor.
  • Levy: Bank levies allow a judgment creditor to seize money in your bank account.
  • Judgment Lien: A creditor with a judgment can record the judgment as a lien against any home or other land you own. This is done by filing a copy of the judgement in the Register of Deeds in the county where you own the property (in the same place a creditor would record a mortgage on the property).

Although judgment creditors rarely try to actually foreclose those liens, once the lien is filed you will not be able to sell or borrow on your house without paying that creditor. The judgment lien debt continues to increase with interest year after year.


How Bankruptcy Can Help

  • If your wages are already being garnished, the Automatic Stay under federal bankruptcy law will stop all further garnishment of your wages.
  • Similarly, the Automatic Stay prohibits creditors from seizing your bank account, and your bank account can be protected  as exempt property in your bankruptcy case.
  • If the judgment has not been recorded as a lien before your bankruptcy case is filed, the  Automatic Stay stops a creditor with a judgment from recording it as a lien on your home. If the judgment has been recorded before your bankruptcy case is filed, Chapter 7 can offer a way to remove a judgment lien on your home.


Can You File Chapter 7 When Your Wages Are Being Garnished?

Even if you are facing or already have a garnishment against you, you may still be able to file Chapter 7.  Many law firms will tell you that Chapter 13 is your only option unless you can pay all of your Chapter 7 fees up front. For clients in this difficult situation I can often offer a payment plan that will allow them to immediately file a Chapter 7 case, stop the garnishment, and free up their earnings to finish paying for the case.
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