If you fail to pay a New Jersey creditor, government entity or any other party in a timely manner, your wages may be garnished. However, it may be possible to put a temporary end to the garnishment by filing for bankruptcy. Generally speaking, a garnishment cannot continue while an automatic stay is in place, and the automatic stay against creditor collection activity goes into effect as soon as your bankruptcy petition is received by a bankruptcy judge.
The automatic stay typically remains in place for the entire proceeding
As a general rule, your wages cannot be garnished while your Chapter 7 or Chapter 13 case is ongoing. However, the stay may be lifted if a creditor can show that there is a good reason for a court to do so. For example, a creditor may allege that you’re filing for bankruptcy in bad faith or that allowing the stay to remain in place will otherwise cause it harm. A stay may also be lifted if you file for bankruptcy several times over a relatively short period of time.
A stay may protect other parties associated with your case
If a friend served as a cosigner on a car loan, that person may also be protected by an automatic stay granted in a Chapter 13 case. Your spouse may also receive additional protection against creditor collection activities such as wage garnishment if you choose to pursue a reorganization bankruptcy.
Filing for bankruptcy may be an effective way to regain some sense of control over your finances. In addition to putting an end to wage garnishment, an automatic stay may also prevent creditors from seizing a home, car or other assets until after your case is discharged.