Nobody wants to advertise that they filed for bankruptcy protection states Park Forest bankruptcy lawyer. Many clients want to know if their employer will find out about the bankruptcy. In general, employees will not find out about you filing a Chapter 7 bankruptcy or in many cases a Chapter 13 bankruptcy case. There are exceptions to this general rule however.
Often times a client who comes to see me is currently being garnished. It could be due to a lawsuit that has gone to judgment and the creditor has now found out that the debtor is employed and sends a wage garnishment to his or her employer and ducks approximately 15% of the person’s net income per pay period. In other cases, someone may have signed a voluntary wage assignment with either a payday loan company or other lending institution and the employer has to deduct the garnishment even though there isn’t any kind of judgment against the debtor. This is sometimes done in an effort of avoiding bankruptcy.
So those are two scenarios where someone is currently being garnished by the time they come to see me about Chapter 7 bankruptcy or Chapter 13 bankruptcy. In those cases, the employer is going to find out about the bankruptcy filing. However, that notice is going to be important to the debtor because that bankruptcy notices going to actually stop the garnishment. So there are certain cases where the employer is going to know about the bankruptcy but it’s relatively harmless. There is also a big difference in the types of bankruptcy. In one case the garnishment completely stops. In the other situation, the garnishment continues in the form of a payroll control order. Regardless of what it is called, there is still money being deducted out of the debtor’s pay.
The other situation where the employer is going to find out about the bankruptcy is in a case of a Chapter 13 bankruptcy filing where the Chapter 13 plan payment is being deducted by what is called payroll control. Payroll control is similar to a wage garnishment but it really is a court ordered deduction whereby the debtor will pay to the Chapter 13 trustee a certain dollar amount each pay period. If the debtor is paid every two weeks, the employer will likely deduct every two weeks and pay that portion that was deducted over to the bankruptcy Chapter 13 trustee.