How Does Bankruptcy Affect Garnishment Proceedings in New York?

The ability to seize a portion of a debtor’s paycheck is one of creditors’ most powerful collection tools under New York law. For low-income families, the loss of even a small portion of a regular paycheck can be catastrophic. Filing a petition for personal bankruptcy can help alleviate this problem by invoking the so-called automatic stay.

A creditor must obtain a valid and enforceable judgment for money before it can use the garnishment process. Once the judgment is obtained, the creditor can require the debtor’s employer (or other party who owes money to the debtor) to pay to it a portion of the debtor’s salary or wages by serving a garnishment summons on the employer. Thus, the garnishment proceeding is an extension of the original judicial process, and it is subject to the automatic stay provision in the Bankruptcy Act.

The automatic stay provision of the federal Bankruptcy Act brings to a halt all judicial proceedings that are intended to collect money from the debtor. The stay becomes effective immediately upon the filing of a Chapter 7 or Chapter 13 petition. Once the petition is filed and the stay becomes effective, all collection actions, including garnishment proceedings, come to a full stop. Creditors have the right to ask the Bankruptcy Court to grant relief from the automatic stay, but such requests require a showing that the stay is not serving its intended purpose.

Anyone who has questions about stopping garnishment proceedings or other collection actions may wish to turn to an experienced bankruptcy attorney for advice. A knowledgeable lawyer can explain the entire bankruptcy process and assist in drafting and filing the petition and related documents. Also, a lawyer’s services may be useful if one or more creditors chooses to ignore the automatic stay. Penalties for such acts are harsh, but a lawyer is usually necessary for the court appearances that are required to enforce the stay.