How Can Bankruptcy Protect You From Garnishment and Creditors?
When debt starts piling up and creditors begin calling, the stress can feel overwhelming. One common and particularly stressful consequence is wage garnishment, where creditors legally take money directly from your paycheck. For many people facing financial difficulties in Oregon, bankruptcy offers a way to stop garnishment and protect themselves from aggressive creditor actions.
At Lyndon Ruhnke, PC, I’m dedicated to helping people across Oregon find relief from overwhelming debt and creditor actions. I understand how stressful it can be to face wage garnishment or mounting bills, and my goal is to provide clear, compassionate guidance through the bankruptcy process.
Whether you’re just starting to feel the pressure or already dealing with aggressive collections, I’m here to listen, answer your questions, and help you take the right steps toward financial peace.
Want to know how exactly bankruptcy shields you? Or what kinds of protection it provides, and what you should expect if you decide to file? Here, I break down how bankruptcy can help you regain control and relief from creditors.
What’s Wage Garnishment and How Does It Work?
Wage garnishment is a legal process where a court orders your employer to withhold a portion of your wages to pay a debt. It usually happens after a creditor sues you, wins a judgment, and then requests garnishment to collect. Garnishment can significantly impact your monthly budget because it reduces your take-home pay before you even receive it.
In Oregon, the maximum amount that can be garnished is generally 25% of your disposable earnings or the amount by which your weekly income exceeds 30 times the federal minimum wage—whichever is less. Even with these limits, garnishment can cause serious financial hardship, especially if you’re already struggling to make ends meet.
How Bankruptcy Stops Wage Garnishment
One of the most immediate and powerful benefits of filing bankruptcy is the automatic stay. Once you file for bankruptcy, the court issues an automatic stay, which legally halts most collection actions, including wage garnishment. This means creditors must stop garnishing your wages right away.
The automatic stay offers temporary relief and gives you breathing room. Creditors are no longer allowed to contact you, file lawsuits, or take any further collection steps without permission from the bankruptcy court. For many people, this break from constant creditor pressure is a huge relief.
Types of Bankruptcy That Can Protect You
In Oregon, the two most common types of bankruptcy that people use to stop garnishment and deal with debts are Chapter 7 and Chapter 13 bankruptcy. Both offer protection, but work in different ways.
Chapter 7 Bankruptcy
This is often called “liquidation bankruptcy” because it involves selling non-exempt assets to pay off some creditors. Most unsecured debts, like credit card bills and medical expenses, can be discharged, meaning you’re no longer legally required to pay them. Filing Chapter 7 triggers the automatic stay, stopping wage garnishment almost immediately. After the process is complete, you get a fresh start without many of your debts.
Chapter 13 Bankruptcy
This type involves creating a repayment plan to pay back all or part of your debts over three to five years. It also stops wage garnishment with the automatic stay and provides a structured way to handle debts you can’t pay all at once. Chapter 13 is useful if you have a steady income and want to keep property that might be lost in Chapter 7. Plus, it allows you to catch up on missed payments, such as mortgages or car loans.
What Debts Can Bankruptcy Protect You From?
Not every debt is treated the same in bankruptcy. Understanding which debts bankruptcy can discharge and protect you from is important when considering your options. Bankruptcy typically helps with:
Credit card debt
Medical bills
Personal loans
Utility bills
Certain tax debts (depending on age and type)
Payday loans
Past due rent or lease payments
Bankruptcy will stop creditors from garnishing wages for these debts once the automatic stay is in place. However, some debts like child support, alimony, and most student loans are generally not dischargeable and may still be subject to collection efforts after bankruptcy.
How Bankruptcy Protects Your Assets and Income
In addition to stopping garnishment, bankruptcy offers protection for some of your property and income through exemptions. Oregon law allows you to keep certain types of property and a portion of your income, so you’re not left completely broke after filing.
Here are some of the protections and exemptions you might qualify for in Oregon:
Equity in your home (homestead exemption)
Personal property like clothing, furniture, and household goods
Tools needed for your job
A vehicle up to a certain value
Retirement accounts and Social Security benefits
A portion of your income earned after filing bankruptcy
By claiming these exemptions, you keep enough to maintain basic living standards while dealing with debt relief. This balance helps people recover financially and rebuild credit.
Steps to Take If You’re Facing Garnishment and Considering Bankruptcy
If garnishment is affecting your paycheck and you’re thinking about bankruptcy, it’s important to act quickly and understand the process. Here’s what you should consider doing:
Gather your financial information: Collect details about your income, debts, assets, and monthly expenses.
Understand your debts: Know which debts are causing the garnishment and which can be discharged through bankruptcy.
Consult with a bankruptcy attorney: An experienced lawyer can evaluate your situation, explain options, and guide you through the filing process.
File for bankruptcy: Once you file, the automatic stay stops garnishment and creditor collection actions.
Attend the creditors’ meeting: This is a required step where you answer questions under oath about your financial situation.
Complete any required financial education courses: These are mandatory before receiving a discharge.
Obtain your discharge: After the court approves, you’ll receive a discharge eliminating qualifying debts and providing a fresh start.
Taking these steps promptly can help you stop garnishment and move toward financial stability. Remember, having the right guidance early on makes all the difference in successfully using bankruptcy to protect yourself.
Potential Challenges and Considerations
While bankruptcy offers strong protections, there are some things to keep in mind. Bankruptcy has an impact on your credit report and may stay on your record for several years. Additionally, not all debts are dischargeable, and some exemptions have limits. It’s also possible that creditors might challenge your bankruptcy if they believe fraud or abuse has occurred.
Filing bankruptcy is a serious decision, but for many facing garnishment and creditor pressure in Oregon, it’s a valuable option that brings relief and a path to financial stability.
Contact My Firm
At Lyndon Ruhnke, PC, I’ve seen how bankruptcy can be a powerful tool to stop wage garnishment and protect clients from aggressive creditors in Portland, Beaverton, Gresham, and across Oregon.
By triggering the automatic stay, bankruptcy immediately stops collection actions, giving you the breathing room to address your debts without losing income to garnishment. Whether through Chapter 7 or Chapter 13, bankruptcy can help you manage debts, protect your assets, and take back control of your financial future.
If wage garnishment is impacting your life and creditor demands are overwhelming, I encourage you to reach out for a consultation. Understanding your rights and options early can make a big difference in your financial recovery and peace of mind. Don’t wait until garnishment takes more from your paycheck—contact me today to explore how bankruptcy could protect you.