Garnishments and Bankruptcy: How Filing Can Protect Your Income

That feeling of dread when you open your paystub and see a significant portion of your hard-earned money gone is something no one should have to endure. A wage garnishment can feel like a penalty that never ends, making it difficult to cover basic living expenses like rent, utilities, and groceries. It often arrives after weeks or months of stressful calls and letters from creditors, and for many Mississippians, it represents a financial breaking point. You work hard for your income, and seeing it intercepted before it ever reaches your bank account can be disheartening and financially devastating.

What Exactly Is a Wage Garnishment in Mississippi?

A wage garnishment is a legal order that directs your employer to withhold a certain amount of your earnings and send it directly to a creditor. It is not something a creditor can do on their own; they must first sue you in court and obtain a money judgment. Once the creditor has this judgment, they can request a “writ of garnishment” from the court, which is the official document served on your employer.

This process forces your employer to become a collection agent for your creditor. They are legally obligated to comply with the court order, and failure to do so can result in penalties for the business.

Common types of debts that can lead to wage garnishment in Mississippi include:

• Unpaid credit card bills
• Medical debt
• Personal loans
• Defaulted student loans (which may have a separate administrative process)
• Past-due child support or alimony
• Unpaid state and federal taxes

Are There Limits to Garnishments in Mississippi?

Yes, both federal and Mississippi laws place limits on how much of your income can be garnished. Creditors cannot simply take your entire paycheck. The regulations are designed to ensure you still have enough money to meet basic needs.

Under the federal Consumer Credit Protection Act (CCPA), the amount that can be garnished from your paycheck is limited to the lesser of two options:

• 25% of your disposable earnings for the week.
• The amount by which your disposable earnings for the week exceed 30 times the federal minimum wage.

“Disposable earnings” refers to the amount of income left after your employer has made legally required deductions, such as federal, state, and local taxes; Social Security; and contributions to state employee retirement systems. It does not include voluntary deductions like health insurance premiums or 401(k) contributions.

Mississippi law follows the federal guidelines for most consumer debt garnishments. However, it is important to note that these limits can be different for certain types of debt. For example, garnishments for child support, alimony, and unpaid taxes often allow for a much higher percentage of your income to be withheld.

How Does Filing for Bankruptcy Immediately Stop a Garnishment?

One of the most powerful tools provided by bankruptcy law is a legal protection known as the “automatic stay.” The automatic stay goes into effect the very moment you file a bankruptcy petition with the court. Think of it as a legal injunction that immediately halts most collection actions against you and your property.

When the automatic stay is active, creditors, collection agencies, and government entities are legally prohibited from continuing their collection efforts. This includes:

• Stopping all wage garnishments (with a few exceptions)
• Ending harassing phone calls and demand letters
• Halting foreclosure proceedings on your home
• Preventing vehicle repossessions
• Stopping lawsuits filed against you

Once your bankruptcy case is filed, your attorney will notify your employer and the creditor who is garnishing your wages. Upon receiving this official notice, your employer must immediately stop withholding money from your paycheck for that specific debt. This protection is not gradual; it is instantaneous and provides immediate financial relief, allowing you to receive your full paycheck again while your bankruptcy case proceeds.

Which Type of Bankruptcy Is Better for Dealing with Garnishments?

The choice between Chapter 7 and Chapter 13 bankruptcy depends on your income, assets, and overall financial goals. Both are highly effective at stopping garnishments, but they work in different ways.

Chapter 7 Bankruptcy

Often called a “liquidation” or “fresh start” bankruptcy, Chapter 7 is designed to eliminate your dischargeable debts completely.

• How it works: A court-appointed trustee reviews your assets to see if anything is not protected by Mississippi’s exemption laws. Most filers find that all of their property is exempt. The trustee liquidates any non-exempt assets to pay creditors, and the remaining eligible debts are wiped out.
• Impact on garnishments: Chapter 7 stops the garnishment immediately via the automatic stay. Because it aims to discharge the underlying debt (like the credit card or medical bill), it provides a permanent solution. Once that debt is gone, the creditor has no legal right to garnish your wages for it in the future.

Chapter 13 Bankruptcy

Known as a “reorganization” or “wage earner’s plan,” Chapter 13 involves creating a repayment plan to pay back some or all of your debt over three to five years.

• How it works: You and your attorney propose a plan to make monthly payments to a trustee, who then distributes the funds to your creditors. The payment amount is based on your disposable income.
• Impact on garnishments: Chapter 13 also stops the garnishment immediately. The debt causing the garnishment is included in your repayment plan. This is particularly useful if you have non-exempt assets you want to keep or if you need to catch up on debts that cannot be discharged, such as mortgage arrears or priority tax debt.

Can Bankruptcy Help Recover Money Already Garnished?

In some limited situations, it may be possible to recover funds that were garnished from your paychecks shortly before you filed for bankruptcy. This involves a legal concept known as a “preference payment.”

The law is designed to prevent a creditor from receiving an unfair advantage by aggressively collecting from you right before you file for bankruptcy. A payment is generally considered a preference if it meets certain criteria:

• It was made to a creditor for a pre-existing debt.
• It was made within the 90 days before you filed for bankruptcy (or one year for “insiders” like family members).
• It allowed the creditor to receive more than they would have through the bankruptcy process.
• The total amount garnished by that one creditor in the 90-day window exceeds a certain amount (this threshold is adjusted periodically).

If these conditions are met, the bankruptcy trustee may be able to sue the creditor to recover the garnished funds. That money then becomes part of the bankruptcy estate to be distributed fairly among all your creditors. This is a complex area of bankruptcy law, and the possibility of recovering funds should be discussed with a knowledgeable attorney.

Contact Our Mississippi Bankruptcy Attorneys Today

A wage garnishment can disrupt your financial stability and add immense stress to your life. You do not have to face this challenge alone. If you are a professional in Mississippi concerned about wage garnishment and your legal options, we invite you to contact Gardner Law Group. We are here to provide clear guidance and help you navigate this difficult time toward a positive resolution. Call us at 228-762-6555 or fill out our online contact form to schedule a consultation.