Wages Garnished After Filing Bankruptcy? It’s an Illegal Automatic Stay Violation. Here’s Your 3-Step Legal Fix.

Professor’s Corner

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

You filed for bankruptcy to avoid a wage garnishment. You did the hard part, took the financial leap, followed the law, and expected relief. So why is your paycheck still being garnished? Panic sinks in! You needed those funds to pay your bills. Should this have happened? Short answer: no! Long answer: It’s a violation of the Bankruptcy Code, and you can get your money back.

The Automatic Stay: Your Legal Shield Starts the Moment You File

Federal law isn’t vague here. The moment your bankruptcy petition hits the court docket, the Automatic Stay kicks in under 11 U.S.C. § 362. It’s not optional. It’s not delayed. It’s immediate.

The automatic stay stops:

• Lawsuits;
• Foreclosures and repossessions;
• Harassing creditor calls;
• And yes, wage garnishments.

Even if the creditor hasn’t received formal notice yet, they’re still bound by the automatic stay. If they keep garnishing after your filing date and time, they’re in violation and could face sanctions from the bankruptcy court. You can read more about the automatic stay via this link.

Why Does Wage Garnishment Happen Post-Filing? (It’s Usually About Timing)

Most wage garnishments post-filing aren’t malicious; they’re bureaucratic. It’s a timing issue in the administrative process. Here’s what usually goes wrong:

Court Delay: Notices take time to reach creditors. Most creditors are enrolled for email notifications from the bankruptcy court system, but for smaller creditors, they receive notice the old-fashioned way, via snail mail.

Even those creditors that receive notice electronically, it could take a while, considering the size of those global companies.

Payroll Lag: Your employer’s payroll department, which is obligated to execute garnishment orders, may not have received notification of your bankruptcy in time to stop the next payroll cycle. For large companies, the corporate headquarters and the Human Resources (HR) department may be located in another state.

None of that excuses the violation; it is still an illegal act. Your focus must now shift to stopping it immediately and recovering the unlawfully taken funds.

Your 3-Step Legal Plan to Stop Garnishment and Get Your Money Back

Step 1: Notify Everyone—Fast and Formally

Start with your employer. Give your employer:

• Your bankruptcy case number. You can obtain your case information via PACER.GOV. I explain how to do so in this blog post that includes a video.
• By showing your employer the date your bankruptcy was filed via PACER.gov, it proves the exact date and time of filing. This should stop future garnishments.
• If possible, make sure to have communications with your employer in writing, such as emails.

Next, notify:

• Remember to contact the law firm representing the creditor, not the creditor itself. This local counsel’s information is typically found on the last page of the lawsuit/complaint filed against you. If you are represented, your lawyer must handle this contact, as most creditors will not speak directly with debtors represented by counsel. The same applies to the law firm representing the creditor.

Step 2: Demand the Return of Garnished Wages

My experience is that once creditors are notified of the Automatic Stay violation, they return the funds promptly. As a bankruptcy attorney, I’ve often resolved this with just a phone call or an email since the timely filing of the bankruptcy petition is easily verifiable. However, to ensure the state-level collection lawsuit is formally shut down, I always recommend one extra, powerful step: filing a Suggestion of Bankruptcy.

The Suggestion of Bankruptcy

The Suggestion of Bankruptcy is automatically generated by the bankruptcy clerk when bankruptcy is filed. The Suggestion of Bankruptcy can be filed with the court where the lawsuit was filed. My experience is that the overwhelming percentage of creditor lawsuits get dismissed once the Suggestion of Bankruptcy is filed. For further information on the steps involved, follow this link.

Step 3: If The Creditor Doesn’t Comply, Go to Court

If the creditor or garnishee refuses to return the money, your attorney can file a Motion for Turnover of Property or Motion for Sanctions or Contempt, which is a more serious action, and it’s a formal request to find the creditor in violation of the Automatic Stay under 11 U.S.C. Section 362(k).

What About Garnishments Before You Filed?

If a creditor garnished more than $600 in the 90 days before you filed, your bankruptcy trustee may be able to claw that money back under the preference rules. This means those funds belong to the bankruptcy estate.  You might still be able to exempt those funds and reclaim them.

Bottom Line: Don’t Let It Slide! It’s Your Money, and the Law is on Your Side.

Post-filing garnishment is illegal. You have rights, and the law is on your side. The key is to act quickly, document everything, and lean on your bankruptcy attorney to enforce the Automatic Stay. If you follow these steps, you’ll have your funds returned to you in no time.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

You can find additional categories by clicking below or by using the search feature at the top of this page:

• Bankruptcy
• Your Wallet

Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.