There is a popular saying that you can’t squeeze blood from a stone. When it comes to someone struggling with credit card debt, not being able to squeeze blood from a stone essentially refers to the inability of someone with limited income to meet all of their financial obligations each month.
If you only have $2,000 worth of after-tax income and your debt obligations alone require $2,400 in minimum payments, that is at least $400 of payments that you cannot make. When creditors realize that you aren’t in a position to repay them, they may become more aggressive in their collection efforts.
A credit card company or other lender may take you to court in the hope of securing a judgment against you. A judgment could lead to a garnishment of your wages, meaning that your creditor gets to take money from your paycheck before you ever receive it.
How Alabama handles creditor garnishment
Every state has its own approach to the rights of creditors who wish to garnish someone’s wages. Alabama’s garnishment rules closely align with the federal standard. Typically, creditors can only claim up to 25% of an individual’s disposable income or however much your weekly income exceeds 30 hours of labor at the federal minimum wage.
Of course, losing up to 25% of your so-called disposable income every month could mean that you don’t have the ability to make payments to other creditors. It could also mean that you can’t cover basic costs, like buying groceries for your family. Sadly, the companies to which you owe money likely won’t care about the financial impact of their actions on you and your dependents.
Can bankruptcy help you with a garnishment?
Bankruptcy proceedings can help people struggling with overwhelming amounts of personal debt. Those who file benefit both from an immediate stop to collection activity and the eventual discharge of their unsecured debts if their filing is successful. Bankruptcy could delay or prevent a creditor lawsuit from going through the courts.
If you file for bankruptcy immediately after a company serves you with notification of a lawsuit, you could avoid a judgment against you. However, once a creditor has a garnishment against your wages, bankruptcy will not necessarily stop them from continuing to collect on that garnishment. In other words, acting quickly is often key to maximizing the benefits that you receive from a bankruptcy filing.