April 2, 2010

Pay Garnishments on the Rise

Filed under: Wage Garnishment

NYTimes – When the bank sued Leann Weaver for not paying her credit card balance, her reaction was typical for someone in that situation. Personal and financial setbacks weighed her down, and she knew she owed the $2,470. So she never went to court to defend herself.

She was startled by what happened next. When she swiped her debit card at the grocery store, it was declined. It turned out Capital One Bank had taken $224.25 from her paycheck, a quarter of her wages for two weeks of work at a retail chain, and her bank account was overdrawn.

“They’re kicking somebody who’s already in the dirt,” she said.

One of the worst economic downturns of modern history has produced a big increase in the number of delinquent borrowers, and creditors are suing them by the millions. Concern is mounting in government and among consumer advocates that the debtors are not always getting a fair shake in these cases.

Most consumers never offer a defense, and creditors win their lawsuits without having to offer proof of the debts, much less justify to a judge the huge interest charges and penalties they often tack on.

After winning, creditors can secure a court order to seize part of the debtor’s paycheck or the funds in a bank account, a procedure called garnishment. No national statistics are kept, but the pay seizures are rising fast in some areas — up 121 percent in the Phoenix area since 2005, and 55 percent in the Atlanta area since 2004. In Cleveland, garnishments jumped 30 percent between 2008 and 2009 alone.

Debt collectors say they are being forced into the action by combative debtors who dodge attempts to settle. “I think there’s a lack of accountability among debtors, and a lack of interest in reaching out to their creditors to resolve things amicably,” said Fred N. Blitt, president of the National Association of Retail Collection Attorneys.

Bankruptcy can clear away most debts. Yet sweeping changes to federal law in 2005 — pushed by the banking lobby — complicated that process and more than doubled the average cost of filing, to more than $2,000. Many low-income debtors must save for months before they can afford to go broke.

In some states, courts allow creditors to charge high interest rates for years after a lawsuit is decided in their favor. In others, creditors can win lawsuits by default and seize wages and bank accounts without a case ever appearing before a judge.

Lack of participation is the most fundamental problem. Some consumers do not even know they are being sued; the people who are supposed to serve them with formal notice have sometimes been caught skipping that step and doctoring the paperwork.

In far more cases, consumers are served but still do not offer a defense. Few can afford lawyers; others are intimidated or confused. In their absence, judges can offer little relief.

In the rare event that a consumer battles back, creditors frequently lack the documentation to prove their claim, and cases are dropped. That is because many past-due debts are owned not by the banks that issued them, but by debt collectors who bought, for cents on the dollar, a list of names and amounts due.

“If the consumers were armed with more education about how to defend against these debts, they’d be successful,” said Jeffrey Lipman, a civil magistrate in Des Moines.

The case of Sidney Jones shows how punishing the system can be. In January 2001, Mr. Jones, 45, a maintenance worker from California Crossroads, Va., took out a $4,097 personal loan from Beneficial Virginia, a subprime lender now owned by HSBC, the big bank.

He fell behind, and Beneficial sued. Mr. Jones did not appear in court. “I just thought they were going to take what I owed,” he said.

By default, Beneficial won a judgment of $4,750, plus $900 in lawyers’ fees, with the debt accruing interest at 27.55 percent until paid in full. The bank started garnishing his wages in March 2003.

Over the next six years, the bank deducted more than $10,000 from Mr. Jones’s paychecks, but he made little headway on his debt. According to a court order secured by Beneficial’s lawyers last spring, he still owed the company $3,965, a sum nearly equal to the original loan amount.

Mr. Jones, who did not graduate from high school, was baffled. “Where did all this money go that I paid them?” he said.

Dale Pittman, a consumer law lawyer in Petersburg, Va. , took Mr. Jones’s case without charge, and found that all but $134 of his payments had gone toward interest, fees and court costs. “It’s a perfectly legal result under Virginia law,” Mr. Pittman said.

HSBC said it ceased collection shortly after Mr. Pittman took the case, but declined further comment. “We are confident we are treating our customers fairly and with integrity,” Kate Durham, a spokeswoman for HSBC North America, said in an e-mail message.

The rare debtors who press their claims, and catch a sympathetic judge, have a shot at a result more to their liking.

Ruth M. Owens, a disabled Cleveland woman, was sued by Discover Bank in 2004 for an unpaid credit card. Ms. Owens offered a defense, sending a handwritten note to the court.

“After paying my monthly utilities, there is no money left except a little food money and sometimes it isn’t enough,” she wrote.

Robert Triozzi, a judge at the time, heard the case. He found that over a period of several years, Ms. Owens had paid nearly $3,500 on an original balance of $1,900. But Discover was suing her for $5,564, mostly for late fees, compound interest, penalties and other charges. He called Discover’s actions “unconscionable” and threw the case out.

Discover defended its actions. “This account was placed with an attorney only after all other efforts to reach the card member were exhausted,” Matthew Towson, a bank spokesman, said in an e-mail message.

Going to court is no guarantee of victory, of course. Consumers who do go are sometimes intercepted by collection lawyers, who press them to sign papers settling without a trial. These settlements may be against the interests of debtors, but they sign anyway.

“We’re signing off on a lot of settlement agreements where we shake our heads and ask, ‘Why is this person settling to this?’ ” Judge Lipman said.

For the working poor, losing a lawsuit can mean disaster. A 1968 federal law exempts 75 percent of a worker’s wages, or 30 times the minimum wage per week, from being taken in garnishment — whichever is less. But increases in the minimum wage have failed to keep up with inflation. As federal law stands now, just $217.50 a week is exempt from seizure. (A few states set higher cutoffs.)

The working poor “have difficulties maintaining payments on life’s necessities with their full paycheck,” said Angela Riccetti, a lawyer with Atlanta Legal Aid who represents indigent clients whose wages are being garnished. “You lose 25 percent of it and everything folds.”

For Leann Weaver, the woman at the grocery store, Capital One’s lawsuit made a bad situation worse. After being evicted from her apartment, she moved in with her grandparents. Without them, she might have ended up on the street or in a shelter, she said.

Capital One declined to comment on Ms. Weaver’s case. “We encourage anyone facing difficulties meeting their financial obligations to contact us right away,” Tatiana Stead, a bank spokeswoman, said in an e-mail message.

Ms. Weaver said she repeatedly asked Capital One for more time to pay her $2,470 debt, but last year the bank filed suit. She failed to show up in court, and a judgment was entered against her, swollen by $1,800 in interest and lawyers’ fees. Then the garnishment began, almost $500 a month, or a quarter of her pay.

“I can’t even look at my paychecks any more,” she said.

May 25, 2009

Kisa Kisa and Mortgage Jam

Two years ago, my sister (Georgia Resident) had a house with an 80/20 that was forecloesed by the 1st mortgage company.  The second mortgage company did not participate in the foreclosure.  Now she has a $30,000 second mortgage that has gone into collections.  We are afraid they will start garnishing her pay soon.  She had a part-time job that pays 8.00/hour and she is barely making ends meet.  What legal remedies does she have to stop any garnishments as a result of this foreclore?

Kisa (more…)

April 8, 2009


I have a auto loan which is upside down,as a result I cannot trade up without a large down payment.I am also looking to refinance my home within the year. Someone stated to me that I could voluntarily repo my car.Is this true and how does this affect my chances of refi on my home.Am I still responcible for paying off the car.If alouded how long of await before I can apply for refi and auto loan. I thank God for you guys,I tell my family,in-laws,close friends and co-workers about you. In todays times we need you more than ever. God Bless.

Reginald (more…)

May 29, 2008

Don’t Fall Asleep on the Junk Debt Buyers!

Filed under: Judgment,Wage Garnishment

I have been sued for a debt that I disputed on my credit report.  The debt could not be verified and was removed from my credit report.  They have now started to garnish my wages. 

Can they sue and garnish my wages even though the debt could not be verified?

Lawrence (more…)

May 26, 2008

Returned To Garnishment

Our busniness went under 8 years ago, and as a result we lost 2 of our 3 rental homes to foreclosure. One of those 2 had a second mortgage on it, the holders of which began garnishment of my husbands paycheck. Soon after, we moved out of state for a brief time, then moved back.

The judgement for this garnishment is dated 06/01 on our credit report and my husband’s paycheck was garnished this month for the same account. I know the statute of limitations in Michigan is 6 years. Does that apply to second mortgages as well?

We were expecting this to come off of our credit report in June, but now will it be renewed for another 7 years?

Wendy (more…)

May 19, 2008

Sheila’s Wage Garnishment

Filed under: FDCPA,Wage Garnishment

It’s me again!!! I recently had my wages garnished from a car I had had voluntarily sent back. The original garnishment was $6242, JD Byrider/ CNAC. The garnishment was paid in late Mar. $325.00 bi-weekly for 10 months.

I get my paycheck today and there it is again…this time $365.00 with a balance of $2895.00. I called the payrol supervisor, she informs me the “garnishment company sent her a letter saying it was not paid and the garnishment should continue until I’ve paid $9,000.00. Is this legal?

I called the courthouse and spoke with a clerk and she says she has nothing on this???? What to do? Thanks in advance for all your wisdom!!!

Sheila (more…)

April 22, 2008

Texas Wage Garnishment

Filed under: Wage Garnishment

About 6 months ago I signed up with a debt consolidation company (big mistake). I am no longer using them.

Now that I have not payed on my credit cards in 6 mo. plus I have added up late fees. I have worked with two companies and am paying monthly. However, one of the cards; it started as just around $10,000 (now well over) has been calling me wanting me to make at least a $1,ooo payment by April 30, 2008 or they will sue me.

I do not have $1,000. I live in Texas.

If I do not pay what can they do to me or take from me? Please HELP!

Tara (more…)

January 31, 2008

Wage Garnishment, Chapter 13, & FHA

Filed under: Wage Garnishment

Hi Paul, in short we had 3 deaths in the family and had to get money to help family with burial exspenses. Paid payments for a year or so and finaly got behind and could not satisfy creditor. Fianally they obtained a judgement for wage garnishment due to commence on my next payday.

Could you tell me if Chapter 13 would look better on credit report or wage garnishment. And how long do they stay on credit report, and how long if you keep up everything would it take to qualify to buy a home after something like that.

Also even if I filed chapter 13 to stop wage garnishment would the judgement still show on my report even though thy only garnished once or twice before the bankruptcy was filed.

I really appreciate your help I can’t seem to get any answers.

Cliff (more…)

September 14, 2007

Junk Debt Limitations

It is me again. I have posted a few times.

Anyway, my hubby and I are trying to get a 502 Rural Development loan and we have to take Homebuyer Education classes. Our first one was tonight.

I have a question about junk debt buyers. The credit counselor they had there tonight said that even if an old debt, like a credit card, is ready to come off your credit after 7 years, then a junk debt buyer can come in and buy it for pennies on the dollar, and start calling you, saying we now owe much more and they will and can garnish our wages.

Doesnt the statute of limitations come into play with this, and can this debt just keep going on forever on your credit?

Thanks so much, LOVE this site.

Deborah (more…)

August 21, 2007

IRS & Bankruptcy

I filed Chapter 7 Bankruptcy in 2004. The Banruptcy was discharged in 2004. The main reason for filing Bankruptcy were debts for back taxes owed to the Internal Revenue Service for not paying enough witholding taxes. My attroney advised mt that the past due taxes would be included in the Bankruptcy, and further collection efforts by the IRS would cease. They did with the exception of one year.The year in question was 1993.The IRS forced me to set up an installament plan to pay. I was advised that the statue of limitations were not going to go in effect until November of 2007. Did I recieve ill advice from my attorney that files the Chapter 7, or is the IRS forcing me to pay by using threats of wage garnishment. Please Advise.

Jeff (more…)

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