June 18, 2024
Annapolis, US 82 F

Can A Creditor Garnish Wages After Filing Bankruptcy?

Filing a bankruptcy can stop a debt garnishment, but it can be helpful to understand whether your debt may be non-dischargeable in a bankruptcy.

If you went through a period of your life where you couldn’t pay back your debt, you might have some old debt that you have been avoiding. What are your options when this is the case? Well, while you have many options, your creditors also have some options. In many cases, creditors can sue you for your unpaid debts. Typically, this leads to garnished wages or liens against your property. However, what happens if 7 years have passed between when you stopped paying your debt back and when your creditor tries to sue you? This answer can be a little more nuanced than you might assume. Let’s take a look at whether or not a creditor can garnish your wages after 7 years.

What Is Wage Garnishment?

Before we get started, let’s define wage garnishment. Wage garnishment is something that can be granted to your creditors or debt collectors. When this is granted to them, they are then able to directly take a portion of your paycheck every time you are paid. The amount is determined by how much you owe, how much you make, and how close to the poverty line you are. 

This garnishment is typically granted until the debt is fully repaid. If you reach different terms with your creditor outside of the court, there might be differences to this. The wages that are being garnished, however, are taken directly from your paycheck. Your employer sends them straight to your creditor. The money will not ever be sent to you. Keep this in mind if you are attempting to work something out with your creditor.

Is There A Statute of Limitations for Wage Garnishment?

It’s not entirely true that there is a statute of limitations on wage garnishment. Rather, there is a statute of limitations on your unpaid debt. This means that creditors have a certain time frame in which they can sue you. If they do not do so in that time frame, they can no longer seek judicial help.

From the moment of your last payment, creditors have a certain amount of years to file a lawsuit against you. For example, let’s assume you owe a debt in Texas. In Texas, the statute of limitations is four years. If your creditors attempt to sue you once that time expires, the courts will not accept the lawsuit.  If you make another payment within those four years, that time resets, and the creditors have four more years. 

The statute of limitations changes from state to state. But once the statute of limitations has expired, the court will not be likely to do anything. So what happens if a creditor tries to sue you after 7 years? Well first, check your state’s statute of limitations. If it is less than 7 years, then you shouldn’t have to worry about a lawsuit. (From what we can find, only Missouri and Alaska have statutes of limitations on debt collection over 7 years). But you still might want to double-check that you haven’t inadvertently made a payment sometime within that time frame. If you did, your creditor can still sue.

What Happens If A Creditor Tries To Garnish My Wages After 7 Years?

There are a couple of different interpretations of this question that changes the answer. Let’s go through a couple of different scenarios to see what your options are.

Scenario One: You Have NOT Made A Payment Within Your State’s Statute of Limitations Window, and Your Creditor Attempts To Sue You

If you have not made a payment, and your debt’s statute of limitations has run out, then your creditor is no longer legally allowed to sue you. This means that you can ignore their pestering. This does not, however, mean the debt is no longer valid. It just means that the court won’t help them collect. The creditor can continue hurting your credit score as long as the debt remains unpaid. 

Scenario Two: Your Creditor Was Granted A Wage Garnishment BEFORE The Statute Of Limitations Ran Out, But The Statute Of Limitations Has Run Out While Your Wage Is Still Being Garnished. 

Unfortunately, if a wage garnishment was granted to your creditor BEFORE the statute of limitations ran out on your debt, the garnishment is granted until the total amount is paid. Even if the statute of limitations “runs out” while you are still having your wages garnished, the creditor is entitled to the entire repayment amount, regardless of how long it has been since the judgment was delivered. 

Scenario Three: You Make A “Good Faith” Payment Once Your Statute Of Limitations Ended To Start Getting Rid Of Your Debt, and Now Your Creditor Tries To Garnish Your Wages

Again, unfortunately, every time you make a payment to your creditor, the “statute of limitations clock” resets, and they are once again able to get the courts involved. If you have managed to evade your creditor for 7 years (or whatever your state’s limitations are), but then decide you want to get rid of your debt, it may not be wise to make small payments unless you talk with your creditor beforehand and explain your intentions. Once the clock resets, they may see it as an opportunity to file a lawsuit against you to finally get a judgment.

What Should I Do If A Creditor Tries To Garnish My Wages After 7 Years?

If a creditor comes after you and tries to garnish your wages after 7 years, consider your state’s statute of limitations. If they have expired, then decide what is best for yourself. At this point, if you have enough saved up at this point to completely pay off the debt, consider doing so! Consider working towards saving up enough to eventually be able to pay it off, if you haven’t yet. If the statute of limitations hasn’t expired, it’s likely you might be on the hook for a wage garnishment. The same is true if you had a wage garnishment prior to the expiration of the statute of limitations. 

Conclusion

While bankruptcy may help stop a garnishment, bankruptcy may not protect your investments and some debts may not be discharged.

It may be helpful to speak with a bankruptcy attorney for more information if you’d like legal advice.

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