Originally published: February 12, 2021 -- Updated: May 16, 2022

UPDATE: As discussed below, wage garnishment is generally not allowed in Texas except for a few types of debts. However, this does not mean that creditors cannot take action to collect debts from a person. In fact, the garnishment of a person’s bank account may be effectively the same as garnishing their wages. By understanding the types of actions a creditor can take, a debtor who is facing this type of situation can determine their best options for receiving relief from their debts. 

If a creditor obtains a judgment against a debtor requiring the debtor to pay the debts that are owed, the creditor may then ask for a turnover receiver. This type of court order will be sent to a person’s bank, and the bank will freeze the debtor’s bank account. This will prevent them from withdrawing any money from the account. Some or all of the funds in the account may then be seized by the creditor.

If you are considering bankruptcy, you are likely to be dealing with multiple types of difficult financial issues. During this time, the last thing you want to worry about is the possibility that you could lose your job or struggle to earn enough income. Fortunately, the bankruptcy laws provide some protection, and by understanding what employers can and cannot do in response to your bankruptcy, you can avoid uncertainty and continue working to achieve financial success in the future.

Can an Employer Fire Me for Filing for Bankruptcy?

Fortunately, Section 525 of the U.S. Bankruptcy Code states that an employer cannot terminate a person’s employment because they have filed a petition for bankruptcy or sought relief from their debts. Employers are also prohibited from taking any other discriminatory actions against an employee, such as demoting them or reducing their wages.

In fact, you generally will not be required to tell your employer that you are pursuing bankruptcy. However, your employer may find out about your bankruptcy on their own in some cases. For example, if your wages are currently being garnished because of a legal judgment against you by a creditor, this garnishment will cease when you file for bankruptcy. Your employer will also be notified if you owe them money for any reason, and you may need to address these debts during the bankruptcy process.

The decision to file for bankruptcy is often not an easy one. This may be seen as a last resort for a person or family that is in dire financial straits. After making every effort to maintain financial stability, repay debts, and address other ongoing needs, a debtor may determine that bankruptcy is their best option for debt relief. Fortunately, the process of filing for bankruptcy does not have to be difficult, and by working with an experienced attorney, a debtor can provide the correct information and complete the required procedures to eliminate certain types of debts. Those who are preparing to file for bankruptcy will need to understand the different types of documents that they will need to provide, as well as any other information that will be required.

Financial Documentation and Related Bankruptcy Information

Proper planning is essential during the bankruptcy process, and by gathering all required documentation ahead of time, a debtor can ensure that they will be able to submit all of the proper forms at the right time while avoiding any complications that may delay their ability to discharge their debts. The following information will need to be provided when filing for bankruptcy:

• Proof of income - The income earned by a debtor will be used to determine whether they pass the means test to qualify for Chapter 7 bankruptcy. Documentation related to income may include pay stubs, W-2 forms, and tax returns for the past few years.

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Debt is a significant issue for millions of people in the United States. In some cases, these debts may be manageable, and a person or family may be able to make affordable payments toward a home mortgage, auto loans, student loans, and/or credit cards while being able to cover their regular living expenses. Unfortunately, there are many situations where a family’s debts may become unmanageable, and they may begin considering bankruptcy. Because of the stigma surrounding bankruptcy, those who are in this position may feel that they will be looked down upon. However, understanding the reasons that people often file for bankruptcy can help a person realize that they are not alone and that they can benefit by receiving relief from their debts.

Bankruptcy Is Usually Based on Issues Other Than Financial Irresponsibility

The stereotypical bankruptcy involves a person who has engaged in reckless spending without considering the consequences of their actions. Many people believe that if a person files for bankruptcy, this is a sign that they have racked up large credit card bills, spent money on unnecessary luxuries, and generally behaved irresponsibly. However, in most bankruptcy cases, this is far from the truth. In fact, people are likely to encounter large debts because of issues such as:

• Medical bills - Around two-thirds of all bankruptcy cases involve medical debts. Even when a person has health insurance, a medical emergency or a major procedure may result in tens of thousands of dollars in medical bills. These issues are often unforeseeable, and a family may find themselves in an impossible situation in which they owe huge amounts of money with no possibility of being able to pay off these debts. Using bankruptcy to wipe out medical debts is often the best solution in these cases.

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Debt is a significant issue that affects many families. Struggling to pay bills and fielding calls from creditors while also working full time–or more–and managing other family responsibilities can be incredibly stressful. While bankruptcy is often the best option for dealing with these situations, many people are hesitant to pursue this type of debt relief. However, the fears that people often have about bankruptcy may be unfounded. By understanding the bankruptcy process and how it will affect your life, you can make sure you are taking the right steps to regain financial stability.

Addressing Bankruptcy Fears

While there are multiple different reasons why your family may be struggling with debts, the option to file for bankruptcy is available regardless of your financial situation. As you consider whether bankruptcy is the right choice for you, it is important to remember that:

• You have options to help you avoid losing your assets - For many people, the biggest concern related to bankruptcy involves the possibility that they will be required to surrender certain assets or that they may lose their home to foreclosure. However, depending on the extent of your assets and the type of bankruptcy you pursue, you may not be required to turn over any property. If you file for Chapter 7 bankruptcy, many of your assets may be exempt from liquidation, and you may even be able to complete a no-asset bankruptcy and avoid the loss of any property. If you are looking to avoid the loss of your home or the repossession of other property, Chapter 13 bankruptcy may be an option that will allow you to repay some of your debts without turning over any assets.

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