The shortest answer to this question is “Yes”. As usual, a debtor must present a case and then be approved by the courts for bankruptcy. The presenting of the case is not a slam-dunk either. Once allowed, bankruptcy, by law, stops, or “stays” all collections and garnishments due to judgments. All collection actions must stop. This is a good thing, if only momentary, due to bankruptcy law. “Momentarily” is used because it is not a guarantee that a judgment will be put aside after the bankruptcy. There are several types of judgments that are not affected by bankruptcy beyond stopping collection while the bankruptcy is active. These are noted in Section 523(a) of the federal bankruptcy law. Also, there are always specific types of incomes, like social security, veterans benefits, federal tax reimbursements, that are exempted from collections and garnishments in the first place.
If a collection agency continues to garnish, that agency is in violation of the law. Hopefully, you have hired, or are at least being advised, by a judgment – bankruptcy lawyer.
One contributor stated a case where a garnishment was returned to the debtor because the garnishment occurred after the bankruptcy was active. Another contributor related having several different judgments active at the time this person filed for bankruptcy. Payments were greatly reduced but continued to occur for nearly five years. Once the bankruptcy was discharged, so were most of the judgments. Seventy five thousand dollars of debt was wiped away. This is a major change in one’s life.
Bankruptcy law no longer allows the debtor complete release from all debt. Chapter 13 is a planned reorganization and repayment process. Chapter 7 now often requires some repayment, typically over a five year period. It is important to realize that once the bankruptcy is discharged, any judgments still in place will resume collection, and garnishment if applicable.
Anyone going into bankruptcy needs to clearly understand that bankruptcy is not a one-way street for removing debt. A bankruptcy mark stays on one’s credit record even after discharge. This mark will retard the debtor’s capability to obtain credit, loans, and the like for several years after the bankruptcy discharge. Expectations and results vary in experiences expressed by online contributors.
One point that came up a few times but in a different light is the essential need for being honest throughout the proceedings where the court is involved. The point to be made is that when fraud has been identified in judgment proceedings, it can great hinder and actually prevent a debtor from obtaining bankruptcy relief. Although it came as a surprise, one must appreciate that loss of an allowance by law is a typically penalty for misuse or disregard for a related aspect of that law.
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