Tag Archives: judgments

Garnishment of Assets by Debt Collectors

debt collectors garnish your wages? What about bank accounts? Here are some things you need to know about garnishment.

If you have assets, and this includes either a job or money in the bank, you must be concerned about the possibility of the debt collector finding and garnishing your money. The risk exists if a debt collector (or anybody else) has a judgment against you.

Governments can levy even without a judgment. Our discussion here focuses on private debt collectors, however.

Bank Accounts

Debt collectors can seize and garnish bank accounts and, when they do, it is almost always comes as a surprise to the debtor. What typically happens is collectors obtain money judgments (usually by default) and then use the judgment to freeze the funds in your bank account.

No Notice of Bank Garnishment

State law and banking rules govern how the bank must handle the garnishment process. Collectors always notify the bank first and then notify the debtor. This way your funds are frozen before you can take any action such as withdrawing all your funds.

Their notifying the bank first is perfectly legal. You typically receive the notice (including your rights) a few days after your funds have been frozen. In most states, the garnishment can only freeze funds already in your account at the time of service on the financial institution. During the time the garnishment is in effect, the financial institution cannot honor checks or other orders for the payment of money drawn against your account.

This means any outstanding checks will more than likely bounce or be returned for NSF (non-sufficient funds). In other words, your checks will bounce. The exception to this rule is if your account has more on deposit than the amount of the garnishment. In this case, the bank can honor checks up to the amount that will reduce your funds below the amount of the garnishment. When the amount being garnished is paid, the freeze on your account must be terminated.

Wages

Debt collectors can also garnish your wages. Again, your first notice that they are garnishing you is likely to be when you receive a check that is less than you thought it would be. Federal law limits the maximum amount they can take to 25 percent of your disposable earnings for that week, or the amount by which disposable earnings for that week exceed thirty times the Federal minimum hourly wage, whichever is less. In simple terms, “disposable income” is whatever money you have left after paying all required taxes and national insurances!

Disposable income is after-tax income that is  the difference between personal income and personal tax and nontax payments. In general terms, personal tax and nontax payments are about 15% of personal income. That makes disposable personal income about 85% of personal income. IMPORTANT: In order for wages to be garnished, disposable earnings per week must exceed thirty times the federal minimum hourly wage.  (That’s $154.50 at the time of this writing.)

Put another way, if you make $154.50 or less per week your wages are immune from garnishment – for now and as long as you don’t make any more than that. Also – most debt collectors can never garnish Social Security and some other types of disability or retirement income.

But You Should Not Let them Get a Judgment if Possible

Even if you have nothing for the debt collectors to garnish, you will almost always be much better off it you don’t let them get a judgment against you. Things could get better for you in any number of ways. So they might eventually be able to garnish you when that happens if you let them have a judgment. Remember that just because things may seem bleak now doesn’t mean that the sun won’t eventually shine. When it does, you don’t want debt collectors to take your good luck away from you.

And it isn’t all that hard to keep them from getting a judgment if you know what you’re doing.

 

Jurisdiction – Why it Matters in FDCPA and Foreclosure

jurisdiction could mean difference between losing home or not
jurisdiction could mean difference between losing home or not

If someone is trying to take away your house for nonpayment of some debt, the Fair Debt Collection Practices Act (FDCPA) may – or may not – be useful to you. The law differs according to jurisdiction, and you will want to choose the one that gives you your best chance.

This article is a very basic primer on the interaction of state and federal jurisdiction when it comes to debt collection generally, and foreclosure more specifically. Wherever you live, you will want to consider both federal and state cases on applying the FDCPA to foreclosure if you want to sue a debt collector for its acts in taking, or trying to take, away your house.

Most Debtor-Creditor and Property Law is “State” Law

In theory, federal law only applies to areas of the law designated by the constitution, whereas everything else is controlled by state law. That can lead to confusing results where those interests overlap. In general, the laws creating and enforcing property rights (e.g., contract rights, debt, or property ownership rights) are state law. If you get sued for a debt, the action will almost certainly occur in a state (as opposed to federal) court. Foreclosure rights are also determined by state law.

Debt Collection Is a Special Situation

Claims under the FDCPA can be brought in either state or federal court. While property rights are creatures of state law, debt collection was considered so extensive a problem that it was a national (i.e., federal) problem. Thus Congress carved out a piece of debtor-creditor law for itself when it enacted the Fair Debt Collection Practices Act, which makes certain actions taken by debt collectors (primarily) illegal. The FDCPA is federal law, in other words, but as it happens it provides that it can be enforced in either federal or state courts.

Because of the way the federal and state law systems mesh, you could conceivably defend a collection action or foreclosure in state court by filing a counterclaim and seeking an injunction, by filing a separate action in state court under the FDCPA, or by filing a federal claim under the FDCPA and seeking an injunction in federal court. Likewise you could defend or settle a state collection action and then bring suit under the FDCPA in federal court (although remember that the FDCPA has a one-year statute of limitations). All of these variations occur quite often.

States are Independent of Each Other

The state law of the court in which the suit is brought will always determine some the procedures in the case and usually the actual “substantive” rights. Under certain circumstances other state laws might also apply (this comes up most frequently where there is a contract that specifies the state’s law that will apply). State laws and procedures can be different from state to state. If you live in Tennessee, you will be subject to the state laws of Tennessee, and these may (or may not) be very different in some important way than the laws of Pennsylvania, for example, or any other state.

If you are pro se (representing yourself), therefore, your first action must be to determine which state laws (and of which states) apply to which parts of your case at the basic debtor-creditor level. In other words, if you are being sued on a credit card debt, is the company suing you under the law of your home state? Or is it suing you under the laws of some other state? In foreclosure law, it will almost always be suing you (or foreclosing without suit) under the law of your own state.

The courts of one state are not bound in any way by the courts of any other state when they are dealing with their own laws, but they are subject to state courts of appeals and the state supreme courts (and sometimes in certain areas of the law, the U.S. Supreme Court).

State Courts are Independent of Federal Courts, too

Things get a little more complicated when it comes to state courts applying other states’ laws or federal law. In a general sense, they “should” determine what the appropriate court applying its own law would do. In reality, there is usually no appeal to those courts, and so the decisions can vary widely.

The Federal Law

The federal system is similar to the state system, except that eventually they all answer to the Supreme Court. That is, when the Supreme Court has spoken, all the federal courts are supposed to make decisions which are consistent with what the Supreme Court says. Because cases are always decided on the narrowest set of facts possible, and because there are so many laws and cases, however, the Supreme Court often will take many years before deciding a given issue. That leaves the lower courts to guess what the Supreme Court would say. One area where that is happening right now regards whether the FDCPA applies to foreclosure. Eventually the Supreme Court will decide one way or another, but until that time, the lower courts apply the law as they see fit. Sort of.

Each Federal Circuit Controls the District Courts below it

The federal (civil) judicial system is divided into three levels: district courts (where lawsuits are filed and tried); courts of appeal (“circuit courts of appeal”) and the Supreme Court. As described above, all courts answer to the Supreme Court. Below that, the federal circuit courts of appeal control all the district courts below them. Appeals are expensive, specially to the Supreme Court, and they are hard to win. Therefore it is vitally important to win, if at all possible, at the trial court level.

How the Different Jurisdictions Interact

Because the federal circuits are independent of one another, and the states are independent of one another and the federal courts, different places develop different rules arising out of the same law. A perfect example of that would be the way the 3rd, 4th and 9th federal circuits (and all the district courts below them) allow FDCPA claims against foreclosers, whereas the 7th and 11th federal circuits limit those rights. The states also vary from each other and the federal circuits.

Forum Shopping

What all those different decisions mean is that if you are being foreclosed on and think the FDCPA applies to your case, you need to “forum shop.” That is, after determining the state laws that apply to the foreclosure itself, your second task is to determine whether or not your state applies the FDCPA to foreclosure. If not, then does your federal circuit? You will need to look at the law for each and decide where to bring your claim. You can bring it in either federal or state law – you should bring it in the jurisdiction that seems most likely to apply the FDCPA to your foreclosure. Although this isn’t necessarily easy to tell, it can make or break your case, and you need to consider the question as a part of your initial strategy.

About Your Legal Leg Up

Your Legal Leg Up is a business dedicated to helping people fight debt collectors without having to hire expensive lawyers to do it. We offer you everything you need to defend your rights – with special help through our membership services to help make the process smoother, easier, and less worrisome. YourLegalLegUp.com has been in operation since 2007. Before that, Ken Gibert practiced law representing people being sued for debt among other types of consumer law.

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