Dealing with overwhelming debt can be a stressful and overwhelming experience. If you’re facing the threat of wage garnishment or foreclosure, it can feel like there’s no way out.
Fortunately, bankruptcy may be the solution you need to regain control of your financial situation. At Berken & Cloyes, we help individuals and families in Denver, CO, navigate the bankruptcy process and provide legal solutions that stop wage garnishments, foreclosure, and other creditor actions.
Here’s how bankruptcy can provide relief from these financial pressures and explain the different types of bankruptcy that could help you start fresh.
Understanding Wage Garnishments and Foreclosure
Before diving into how bankruptcy can stop wage garnishments and foreclosure, it’s essential to understand what these terms mean:
Wage Garnishment
Wage garnishment is a legal process in which a creditor obtains a court order to take a portion of your wages directly from your paycheck to repay a debt. This typically happens after a creditor sues you and wins a judgment against you. The amount taken from your paycheck can vary depending on the type of debt, but it’s often a percentage of your disposable income.
Foreclosure
Foreclosure is the legal process by which a lender takes possession of a home or property due to the homeowner’s failure to make mortgage payments. If you are behind on mortgage payments and facing foreclosure, your home could be sold at auction to pay off the remaining mortgage balance.
Both wage garnishment and foreclosure can have serious consequences on your financial well-being and long-term stability. Fortunately, bankruptcy provides a legal mechanism to stop these actions and help you regain control of your finances.
How Bankruptcy Stops Wage Garnishments
One of the immediate benefits of filing for bankruptcy is the automatic stay. The automatic stay is a provision that goes into effect the moment you file for bankruptcy. This court order stops creditors from taking any further collection actions against you, including wage garnishments, foreclosure proceedings, and creditor harassment.
Here’s how bankruptcy can stop wage garnishments:
- Chapter 7 Bankruptcy: Chapter 7, also known as “liquidation bankruptcy,” is designed for individuals who have significant unsecured debt, such as credit card debt and medical bills. Filing for Chapter 7 bankruptcy will trigger the automatic stay, halting wage garnishments immediately. While Chapter 7 may result in the liquidation of some non-exempt assets, it can eliminate most types of unsecured debt, including those that led to the garnishment in the first place.
- Chapter 13 Bankruptcy: Chapter 13 bankruptcy involves creating a repayment plan to pay back a portion of your debt over three to five years. While Chapter 13 doesn’t immediately eliminate debt, it does stop wage garnishments as part of the bankruptcy process. Additionally, it allows you to catch up on past-due payments in a manageable way, preventing further garnishments while you’re working to repay creditors.
Both Chapter 7 and Chapter 13 bankruptcy can help you stop wage garnishments and provide you with much-needed relief.
How Bankruptcy Stops Foreclosure
Foreclosure is a serious concern, and if you are behind on mortgage payments, your home is at risk. However, filing for bankruptcy can help you stop foreclosure in its tracks, at least temporarily, and provide you with time to catch up on missed payments or explore other options. Here’s how bankruptcy can help:
- Chapter 7 Bankruptcy: While Chapter 7 bankruptcy will not prevent foreclosure in the long term if you are unable to catch up on your mortgage payments, it does provide an immediate reprieve. The automatic stay will temporarily halt the foreclosure process, giving you time to explore options such as a loan modification or negotiating with your lender. If you’re facing a foreclosure sale, Chapter 7 can provide a short-term solution while you consider your next steps.
- Chapter 13 Bankruptcy: Chapter 13 bankruptcy is often the best solution for individuals facing foreclosure. This type of bankruptcy allows you to create a repayment plan to catch up on your missed mortgage payments over time. This can be particularly beneficial if your mortgage lender is threatening foreclosure due to missed payments. Once you file for Chapter 13 bankruptcy, your lender must stop the foreclosure process and work with you to catch up on your payments.
In some cases, Chapter 13 bankruptcy can even help you eliminate second mortgages or home equity lines of credit (HELOCs) that are considered unsecured debt, potentially reducing the amount you owe on your home.
Benefits of Bankruptcy for Wage Garnishments and Foreclosure
Filing for bankruptcy offers several key benefits for individuals dealing with wage garnishments and foreclosure:
- Immediate Relief: The automatic stay halts most collection activities, including wage garnishments and foreclosure proceedings, providing immediate relief from creditor actions.
- Time to Catch Up: Bankruptcy gives you time to catch up on missed payments. Whether you’re behind on credit card bills or mortgage payments, bankruptcy can provide the breathing room you need to get back on track.
- Debt Elimination: In Chapter 7 bankruptcy, most unsecured debts are discharged, meaning they no longer need to be repaid. This can help free up your finances and prevent future garnishments.
- Long-Term Financial Strategy: Chapter 13 bankruptcy allows you to reorganize your debts and create a repayment plan, offering a more structured approach to paying off your debt while protecting your assets from foreclosure or wage garnishment.
- Protection of Assets: Bankruptcy can protect your assets, including your home and personal property, from being seized by creditors. In Chapter 7 bankruptcy, certain assets are exempt from liquidation, and in Chapter 13, you have the ability to keep your property as long as you follow your repayment plan.
How Berken & Cloyes Can Help You
At Berken & Cloyes, we understand the challenges that come with dealing with wage garnishments and foreclosure, and we’re here to help. Our experienced bankruptcy attorney in Denver specializes in helping individuals and families navigate the bankruptcy process and find the best solution for their financial needs.
We’ll guide you through the bankruptcy process, whether you’re considering Chapter 7 or Chapter 13 bankruptcy, and help you understand how each option can help stop wage garnishments and foreclosure.
Our team will work with you to create a customized strategy that fits your unique circumstances and goals.
