Wage Garnishment & Bankruptcy
Michigan Wage Garnishment LimitsMichigan law protects most of your paycheck from wage garnishment. The amount available to a creditor depends on how much you earn. The amount that can be garnished is the lesser of:
- 25% of your disposable income, or
- The amount of disposable income left over after deducting 30 times the federal minimum wage
Stopping Wage Garnishment in MichiganAfter a creditor obtains a judgment against you, they must wait 21 days to get a garnishment order. That means you can avoid garnishment by paying off the creditor before the 21 days runs out. Of course, most people facing garnishment can’t just pay off the debt in full. If that’s not an option, you may be able to avoid garnishment by reaching an agreement with the creditor. For instance, you may be able to settle the debt with a lump sum payment that is less than the full amount, or to work out a voluntary payment arrangement that doesn’t involve wage garnishment. You may also file a motion asking the court to allow you to make installment payments instead of having your wages garnished.
The Automatic Stay in BankruptcyIf you can’t work out a reasonable payment plan with the creditor or can’t afford to make payments at all, you may be able to avoid or stop wage garnishment by filing for Chapter 7 or Chapter 13 bankruptcy. These two types of bankruptcy are very different, but they have one important thing in common. In most bankruptcy cases, a court order called “the automatic stay” is entered as soon as you file your bankruptcy petition. This order tells creditors and others to stop any collection action against you.
- If the creditor hasn’t yet gotten a judgment against you, the automatic stay can prevent them from going to court, meaning that no garnishment order is entered.
- If the creditor has a judgment against you but hasn’t yet obtained a garnishment order, the proceedings are halted and the order is not issued.
- If the creditor has a garnishment order but your employer has not yet started withholding money from your paycheck, the automatic stay freezes the process.
- If your employer is already withholding money to satisfy a judgment order, the automatic stay tells them to stop.