Property Garnishments and Frozen Bank Accounts: How Bankruptcy Stops Them

Introduction

One of the most stressful moments for individuals in financial trouble is waking up to find that their paycheck has been garnished or their bank account frozen. Creditors have powerful tools under state law to collect debts once they have a judgment, but bankruptcy provides equally powerful protections. The good news? Filing for bankruptcy can stop garnishments and unfreeze your bank account in many cases.

How Garnishments Work

• Wage Garnishment: Creditors can get a court order requiring your employer to withhold a percentage of your paycheck. In Maryland, this can be up to 25% of your disposable wages.

• Bank Account Garnishment: Creditors can freeze your bank account and seize the balance to satisfy a judgment. This often comes without warning.

• Other Garnishments: Tax refunds and even certain benefits can be intercepted depending on the creditor.

  
  

The Bankruptcy Solution: Automatic Stay

When you file for bankruptcy—whether Chapter 7 or Chapter 13—the court issues an automatic stay. This is a federal injunction that immediately:

• Stops wage garnishments

• Stops bank account freezes

• Stops lawsuits and collection calls

Creditors must stop collection efforts the moment the bankruptcy is filed. Violating the stay can result in penalties for the creditor.

What Happens to Money Already Taken?

• Wages Taken Within 90 Days: If more than $600 was garnished in the 90 days before filing, your attorney may be able to recover those funds for you through the bankruptcy.

• Frozen Bank Accounts: If the funds are exempt (for example, Social Security, VA benefits, or other protected income), your lawyer can file motions to release the freeze.

Chapter 7 vs. Chapter 13 Relief

• Chapter 7: Offers immediate relief from garnishments. If debts are discharged, creditors cannot resume garnishment afterward.

• Chapter 13: Stops garnishments and allows you to pay back a portion of debts over time. This may allow recovery of seized wages and better protection for assets.

Protecting Exempt Income

Certain types of income are exempt from garnishment under federal and Maryland law, including:

• Social Security benefits

• VA benefits

• Retirement accounts

• Certain types of public assistance

It’s crucial to disclose the source of your income in bankruptcy so that it can be properly protected.

Real-World Example

A Maryland client had 25% of her paycheck garnished after a judgment from a credit card company. After filing Chapter 7, the garnishment stopped immediately. Since more than $1,200 had been taken in the prior 90 days, we were able to recover those wages back from the creditor. Bankruptcy not only gave her paycheck back but also provided long-term debt relief.

Conclusion

If your wages are being garnished or your bank account has been frozen, bankruptcy offers one of the fastest and most effective solutions. The automatic stay is immediate and powerful—it can stop garnishments, unfreeze accounts, and give you control over your finances again.

Next Step: Don’t let creditors control your paycheck. Contact Middleton Bankruptcy today for a consultation and learn how we can help stop garnishments and protect your income.