Can Bankruptcy Stop Bank or Wage Garnishment in Colorado?

If you’re facing the threat of losing your home to foreclosure, having your car repossessed, your bank account frozen, or seeing your paycheck reduced by wage garnishment, you’re likely feeling overwhelmed. The good news is that filing for bankruptcy can often stop these actions immediately through a powerful legal protection called the automatic stay. For Colorado residents struggling with unmanageable debt, bankruptcy can provide critical breathing room to regroup and explore long-term solutions.

At LONG & LONG P.C., our experienced Denver bankruptcy attorneys help clients throughout Colorado understand how bankruptcy can halt aggressive creditor actions. Below, we’ll explain exactly how bankruptcy works to stop foreclosure, repossession, and wage garnishment — and what options may be best for your situation.

What Is the Automatic Stay in Bankruptcy?

The moment you file a bankruptcy petition in Colorado (either Chapter 7 or Chapter 13), an automatic stay goes into effect under federal bankruptcy law. This court order immediately prohibits most creditors from:

• Starting or continuing foreclosure proceedings
• Repossessing vehicles or other property
• Garnishing wages or bank accounts
• Making collection calls or sending demand letters
• Pursuing most lawsuits to collect debts

The automatic stay is one of the most powerful tools in bankruptcy and typically takes effect the instant your case is filed — often stopping a scheduled foreclosure sale or repossession with just hours to spare.

Can Bankruptcy Stop Foreclosure in Colorado?

Yes — filing bankruptcy can stop a foreclosure sale, even if it’s scheduled for the next day.

In Colorado, lenders must follow strict timelines for non-judicial foreclosures (the most common type). Once the automatic stay is in place:

• The foreclosure sale is halted
• The lender cannot proceed without first obtaining court permission (a “motion for relief from stay”)

Chapter 7 vs. Chapter 13 for Foreclosure

• Chapter 7 bankruptcy provides temporary relief. The stay typically lasts 3–4 months while the bankruptcy case is open. This gives you time to negotiate with your lender or explore other options, but it does not allow you to catch up on missed payments over time.
• Chapter 13 bankruptcy offers a longer-term solution. You can propose a 3–5 year repayment plan to cure mortgage arrears while keeping your home. As long as you make plan payments, the automatic stay remains in effect and protects your property.

Many Colorado homeowners choose Chapter 13 specifically to save their homes from foreclosure.

Can Bankruptcy Stop Vehicle Repossession?

Yes — bankruptcy can stop repossession before it happens and may even help you get a repossessed vehicle back in some cases.

If your lender has not yet taken your car, truck, or motorcycle, the automatic stay prevents repossession immediately upon filing.

Key Considerations for Vehicle Repossession in Colorado:

• If the vehicle was repossessed before you filed, recovery becomes more difficult (though Chapter 13 sometimes allows redemption or recovery if filed quickly).
• In Chapter 7, you may be able to keep your vehicle by reaffirming the loan or redeeming it for its current fair market value.
• In Chapter 13, you can often cram down the loan to the vehicle’s current value and pay it through your repayment plan at a potentially lower interest rate.

Colorado’s exemption laws also allow you to protect a certain amount of equity in your vehicle, helping you keep it even in Chapter 7.

Can Bankruptcy Stop Wage Garnishment in Colorado?

Yes — most wage garnishments stop immediately when you file for bankruptcy.

In Colorado, creditors with a court judgment can garnish up to 20% of your disposable earnings (depending on your income level). Common garnishable debts include credit cards, medical bills, and personal loans.

Once the automatic stay is in place:

• Creditors must stop garnishing your wages
• Any funds garnished shortly before filing may be recoverable

Important Exceptions

Bankruptcy does not automatically stop garnishments for:

• Child support or alimony
• Certain tax debts
• Federal student loans (in most cases)

However, Chapter 13 can sometimes restructure priority debts like back taxes or domestic support arrears into an affordable repayment plan.

Chapter 7 vs. Chapter 13: Which Is Right for Stopping Creditor Actions?

A qualified Colorado bankruptcy attorney can help you determine which chapter best fits your goals.

Limitations: When Bankruptcy May Not Stop Collection Actions

While the automatic stay is powerful, it’s not absolute:

• Repeated bankruptcy filings may limit or eliminate the stay
• Secured creditors can request court permission to proceed
• Certain debts (domestic support, recent taxes, student loans) have limited protection

Acting quickly is essential — the sooner you file, the stronger the protection.

Take Control of Your Financial Future Today

If you’re facing foreclosure, repossession, or wage garnishment in Colorado, bankruptcy may provide the immediate relief you need. The automatic stay can stop creditor actions in their tracks and give you time to rebuild.

Don’t wait until it’s too late. Contact an experienced Denver bankruptcy attorney for a free consultation to discuss your specific situation and explore whether Chapter 7 or Chapter 13 is right for you.

Call LONG & LONG P.C. NOW to Schedule Your Free Consultation Today. Phone: 303-832-2655 Serving Denver, Aurora, Lakewood, and all of Colorado.

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Disclaimer: This article is for informational purposes only and does not constitute legal advice. Bankruptcy laws are complex, and outcomes vary by individual circumstances. Consult a qualified Colorado bankruptcy attorney for advice tailored to your situation.