Wages

Wage and Income
Exemptions in Bankruptcy

How much of your income is protected from creditors and the trustee. State and federal protections compared.

Wage Protection in Bankruptcy

Your wages earn special protection in bankruptcy through a combination of federal and state exemption laws. The automatic stay immediately stops wage garnishments, and exemptions protect your earnings from the trustee.

Federal Garnishment Limits

Federal law (15 U.S.C. section 1673) limits garnishment to 25% of disposable earnings or the amount by which weekly earnings exceed 30 times the federal minimum wage, whichever is less. Many states provide even greater protection.

State Wage Exemptions

States that protect more than the federal minimum include: Texas and South Carolina (100% of wages exempt from garnishment for most debts), Pennsylvania (100% exempt except for specific debts), North Carolina (100% for the first $500/month with percentage above).

Check your state's specific wage exemption, as protections vary significantly.

Protecting Wages in Your Bank Account

Once wages are deposited in your bank account, they may lose their wage exemption protection and become subject to your state's general bank account exemption instead. Some states have "tracing" rules that protect deposited wages for a period (commonly 30-60 days).

Strategy: file when your bank balance is low, or maintain a separate account for non-wage income to simplify tracing.

Frequently Asked Questions

Are my wages protected in bankruptcy?
Yes. The automatic stay stops garnishments immediately. Federal law limits garnishment to 25% of disposable earnings, and many states provide greater protection.
Can the trustee take my paycheck?
In Chapter 7, your post-filing income is generally not part of the bankruptcy estate -- your future paychecks are yours. In Chapter 13, your disposable income funds the plan.
What about wages already in my bank account?
Deposited wages may lose their wage exemption protection depending on state law. Some states allow tracing of wages in bank accounts for 30-60 days.
Does the automatic stay stop wage garnishment?
Yes, immediately upon filing. Your employer must stop garnishment as soon as they are notified of your bankruptcy filing.

Related Topics on This Site

Last updated: April 2026. Not legal advice.

Part of the Bankruptcy Transparency Network

Related Guides

Stay updated on new datasets and research findings

No spam. No marketing. Just data.

Free, open-source bankruptcy transparency. No ads. No data collection. Supported by donations.

Support on Ko-fi