As a north Texas bankruptcy attorney I often meet with clients that are having their wages or their accounts garnished. Garnishment is the act of seizing money from a debtor. Only certain types of creditors can garnish wages in Texas. The most common ones include the Internal Revenue Service, child support recepients, and student loan creditors.
In general, bankruptcy will stop garnishment by the IRS and student loan creditors while the case is active, but both of these types of creditors have claims that are not discharged in bankruptcy, which means once the case is closed they can begin wage garnishment again. Child support creditors can continue to garnish wages while the bankruptcy case is ongoing when the debtor owes a continuing obligation to pay child support. However, if the amounts owed are child support arrears, meaning the debtor fell behind on their payments at some point, then that portion of the debt is paid in full during a Chapter 13 bankruptcy case or will not be paid during a Chapter 7 case. However, the portion unpaid at the close of a Chapter 7 case is still not dischargable and must be paid once the case is finished.
Garnishment of accounts are usually pursued by judgment creditors. This means that a creditor has sued the debtor successfully and has obtained a judgment. Obtaining a writ of garnishment creates a lien in the funds in the account. Once this happens the bank will not release the funds to the debtor. After filing bankruptcy the debtor can file a motion to avoid the judicial lien, making the debt unsecured, at which point the bank will release the funds to the accountholder. The debt is then treated in the bankruptcy case in the same was as all of the other general unsecured creditors. However, in this situation the debtor must file bankruptcy quickly. The bank won’t hold the funds forever. If the debtor delays in filing bankruptcy then the bank may release the funds to the creditor.