Pay Garnishments Rise as Debtors Fall Behind

            <img class="alignleft size-full wp-image-2964" title="debt" src="http://www.prisonbreakfreak.com/wp-content/uploads/2010/04/debt.jpg" alt="" width="392" height="154" />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.

Posted in Employment, Finance, Law, Odd News, Odd Stuff & News, Off Topic, Taxes.

46 Comments

  1. I have been browsing online more than three hours as of late, yet I by no means discovered any attention-grabbing article like yours. It is beautiful price enough for me. Personally, if all website owners and bloggers made just right content material as you did, the web might be much more helpful than ever before.

  2. how to obtain prescription for viagra
    [url=https://viaonlinebuy.us/#]buy viagra pills[/url]
    what do i need to do to get cialis or viagra

  3. using viagra after gastric bypass surgery
    buy viagra online canada viaonlinebuy.us viagra cost
    how much viagra should i take the first time?

  4. I really like what you guys tend to be up too. This sort of clever work and reporting! Keep up the terrific works guys I’ve added you guys to blogroll.

  5. 100 mg sidenifil equals how much viagra?
    <a href=https://www.v1agrabuy.com/#>buying generic viagra online</a>
    viagra variety

  6. how often can a man come during a viagra erection
    purchase viagra online www.v1agrabuy.com buy viagra on line
    what to do when viagra stops working

  7. I have been browsing online more than 3 hours as of late, yet I never found any interesting article like yours. It’s lovely price sufficient for me. In my view, if all site owners and bloggers made excellent content as you did, the net will be much more helpful than ever before.

  8. what is the herbal equivalent to viagra
    viagra prices https://viaonlinebuy.us/ viagra prices
    when should you not take viagra

  9. when did viagra come out
    <a href="https://viaonlinebuy.us/#">buy viagra online</a>
    viagra seduced mom lesbians

  10. what’s better than viagra
    <a href=https://viaonlinebuy.us/#>generic viagra 100mg</a>
    what does viagra do to someone without ed

  11. I really like what you guys are up too. This type of clever work and coverage! Keep up the amazing works guys I’ve you guys to our blogroll.

  12. side effects of viagra pills
    browse around this web-site https://onlineuniversalwork.com/3ic2c cheap viagra
    does viagra work

  13. how old do you have to be to buy viagra
    <a href="https://jtbtigers.com/3f0rj#">cheap viagra</a>
    where can i get free viagra samples

  14. sildenafil citrate vs viagra
    <a href=https://onlineuniversalwork.com/3ic2c#>viagra pills</a>
    what schedule of drug is viagra

  15. what would happen if a person crushed and snorted viagra this is why women don’t take viagra big tits
    viagra dosage recommendations https://aviib.com/ natural viagra
    how can i stop calls about viagra viagra or cialis which is better

  16. where can i get viagra without a doctor
    generic viagra 100mg https://popularedstore.com/ tadalafil tablets viagra dosage
    viagra is for who where is the best place to buy generic viagra

  17. what are the doses of viagra
    generic cialis at walmart https://lmeed.com/ buy viagra
    viagra recetesiz satilir mi how much is generic viagra

  18. viagra vs cialis
    pfizer generic viagra https://edzxc.com/ canada pharmacy viagra generic viagra pills
    where to get female viagra viagra heart medicine

  19. viagra in cvs pharmacy
    sildenafil 100 mg generic viagra without a doctor prescription https://edphrm.com/ sildenafil 20 mg tablet reviews buy tadalafil
    do you need a prescription for viagra in canada

  20. effective shelf life of viagra
    buy sildenafil citrate 100mg online viagra 100mg https://ingogf.com/ cialis without a doctor prescription
    what is generic viagra how old do you have to be to take viagra

  21. how to maximize viagra
    generic viagra trusted pharmacy cialis 5mg https://edjass.com/ side effects of viagra sildenafil
    what are the ingredients of viagra mom helps viagra story

  22. where can i buy viagra near me viagra is what kind of medication
    sildenafil coupons tadalafil generic at walgreens https://goeedl.com/ cheap cialis cialis online
    is viagra available in generic

  23. [url=http://obzorgeleza.ru/2017/06/dollar-ssha-podeshevel-pochti-na-rybl/]legal age to buy viagra
    [/url]
    [url=http://npprost.ru/videokarta-asus-radeon-r7-250x-r7250x-1gd5-1gb-gddr5-ret.html]viagra best buy website review
    [/url]
    [url=http://www.tademavto.ru/index.html_id=39&lang=.html]buy generic viagra without a prescription
    [/url]
    [url=http://apuane.ru/afanasii_velikii3.html]where to buy viagra single packs
    [/url]
    [url=http://сандунов.рф/veniki/venik-bannie-shtuchki-duboviie.html]is it legal to buy viagra from canadian pharmacy
    [/url]

  24. [url=http://oblizanet.ru/164-ris-s-ovoshchami-i-kuritsey.html]can you buy viagra for women over the counter
    [/url]
    [url=http://astrawiki.ru/index.php/%D0%A1%D0%B0%D0%B9%D1%82%D1%8B]buy viagra fast shipping
    [/url]
    [url=http://www.massprofi.ru/sistemy-massazha/m_22]buy viagra online site reviews
    [/url]
    [url=http://canned-meat.ru/DetskieMyasnieKonservi/detskie-myasnie-konservi-v-minske]where can i buy viagra reddit
    [/url]
    [url=http://npocekc.ru/category/vozbuzhdayushhaya-eda/page/2/]buy viagra super active cheap
    [/url]

  25. internet viagra
    generic cialis canada pharmacy free viagra samples https://edzssl.com/ canadian pharcharmy online viagra
    this is why women don’t take viagra big tits how do i get a viagra prescription

  26. viagra and diabetes type 2 <a href=https://nancyedpharm.com/>viagra use video</a> achat en ligne viagra can i get a prescription for viagra online

  27. <a href=http://numberonautics.ru/number5/Lucky-numbers.html>buy viagra without a prescription online
    </a> <a href=http://bestqualityfoodstuff.com/when-cafeteria-sales-are-flat-its-time-to-call-a-specialist>can you buy viagra online in australia
    </a> <a href=http://coruscelik.com/en/products/construction_products_and_services/roofs/>buy viagra scotland
    </a> <a href=http://snls.org/sbord/index.php?fid=49&id=52328>levitra buy levitra online viagra
    </a> <a href=http://cmex-ok.ru/main/1/0J3QotCa.html>where can i buy viagra in the uk
    </a>

  28. what is over the counter viagra natural viagra for men <a href=https://trustgenericstore.com/>what happens when you take viagra without ed</a> what happens if a woman takes viagra or cialis

  29. viagra femenino precio how much does viagra cost at walgreens 200 milligram viagra <a href=https://edviagara.com/>viagra young men</a> viagra and vision loss

  30. where to get viagra or cialis where can you find viagra <a href=https://medvirgra.com/>long term effects of cialis use</a> viagra precio mexico use viagra

  31. what happens if i take viagra and edex viagra founder <a href=https://viagreusa.com/>blood pressure medication with no side effects</a> generic viagra 150 mg pills

Leave a Reply

Your email address will not be published. Required fields are marked *

Human Verification: In order to verify that you are a human and not a spam bot, please enter the answer into the following box below based on the instructions contained in the graphic.