When you are facing debt that you cannot pay, the best thing you can do is act early, talk to creditors and consider bankruptcy. Otherwise, if you ignore and fail to pay your debt, your employer may start to withhold some of your wages because of a court judgment.

The last resort of debt collection

Generally, wage garnishment is the last step that debt collectors take. If you notice your wages are being withheld, you are probably in deep trouble. Wage garnishment usually occurs after the creditor determines it cannot recover the debt. your wages can only be garnished if the creditor files a lawsuit against you. If the lawsuit is successful, the court may issue a judgment that approves the withholding of your wages, bank accounts or property.

Tackle the issue head-on

If you receive notices of wage garnishment, you may try to deal with it the same way you deal with your debt, which is by ignoring it. It can be stressful to communicate with creditors and come to terms with your financial troubles. You may want to bury your head in the sand and pretend this is not happening. However, this will not stop the issue from getting worse. You should try your best to pay back your debt or look into filing bankruptcy.

Bankruptcy can help

While declaring bankruptcy may sound scary, it may be the best thing for you to do if you are suffering from wage garnishment. When you declare bankruptcy, a federal order will overrule the garnishment judgment. Do not be afraid to consider bankruptcy to stop wage garnishment.

Once the bankruptcy is behind you, restoring your credit will be the next goal, and you can begin by putting together a plan of action in five easy steps.

1. Take stock of your situation

You can get free annual credit reports. Take a close look to make sure all the information is accurate. If there are errors, you will need to dispute them and see that the mistakes are corrected. You will also want to check your credit score—also for free—and look at the same score each month in order to track it accurately.

2. Develop a budget

Putting a budget together will help immensely when you are rebuilding your credit. You probably received budget counseling in connection with the bankruptcy process, and it will help you keep your finances in check.

3. Create your emergency fund

Make it a habit to set a little money aside each month. Having an emergency fund of even $200-$300 will help you take care of unexpected expenses so that you will not have to take a payday loan or use your credit card.

4. Apply for secured credit

A secured credit card is one that you back with a deposit, and the credit line is normally that amount. Having this kind of card after bankruptcy helps to build a good credit profile. Be sure that the bank or credit union you choose for your card reports activity not just to one, but to all three credit bureaus. You want to have your credit information recorded everywhere.

5. Make timely payments

Once you have put all the parts of your post-bankruptcy plan into action, keep it humming along by making payments on time every month. When you begin seeing an improved credit score, you will be proud of yourself and well on your way to a sound financial future.

Understanding how a Chapter 7 bankruptcy works can help you see whether it will be the best solution for the problems you face. Each type of filing has its pros and cons, as well as its own specific requirements.

Speedy process

One of the major advantages of Chapter 7 is its relatively quick timeframe. Typically, you can expect the whole process to take between three and six months. At the end of this period, you can have your fresh start.

How it works

During a Chapter 7, the trustee inventories your assets, sells them off and pays off eligible debt with the proceeds. Any eligible debt still left at this point will be discharged.


Under Illinois and federal law, some of your assets remain exemptfrom the bankruptcy sale for up to a specific amount. Generally, these include personal vehicles, personal items such as clothing, housing, insurance benefits, pension payments, child support and tools you need for your job.

The law limits the amount of equity that is exempt. For example, if you have a house worth $100,000 and you have paid off $25,000, you have $25,000 worth of equity. If your equity falls below the exemption threshold and you are current with loan payments, you can reaffirm your debt and keep the asset.

If your equity in an exempt asset exceeds the exemption amount, the trustee can sell it and return to you the amount of your exemption before distributing the rest of the proceeds to creditors. When a married couple files jointly, they typically each have a full set of exemptions. Thus, the Illinois homestead exemption allows for a value of up to $15,000; a couple can claim up to $30,000.

Nondischargeable debt

Chapter 7 cannot discharge all types of debts. Typically, you will still need to pay anything ordered by a court, such as a judgment, fine, child support or alimony. Debt incurred through fraud is not eligible for discharge. You may also remain responsible for certain types of tax and student loan debt.