Could Your Wages Be Garnished? Personal Bankruptcies Spike

[marmar]

via AlterNet:



Posted by Adele Stan at 5:49 am
April 2, 2010

Could Your Wages Be Garnished? Personal Bankruptcies Spike


Two stories in the New York Times caught my eye. They don’t reference each other, but they would appear to be related. From today:

Pay Garnishments Rise As Debtors Fall Behind

and, from yesterday:

Steep Increase in March in Personal Bankruptcies

In his story on bankruptcies, Duff Wilson notes that, despite the tightened bankruptcy law passed in 2005, filings are up, especially for the Chapter 7 process, which requires filers to give up their homes if they own one:

“Fewer people are trying to save their homes,” Katherine M. Porter, a University of Iowa law professor and bankruptcy expert, said in an interview by phone on Thursday. “They realize their payments are not affordable, and bankruptcy judges do not have the power to adjust the mortgages to make them more affordable.”

But not everybody can afford to go bankrupt, as the average cost of filing adds up to $2000. So for someone like Leann Weaver, featured by John Collins Rudolph in his story on garnishment, who couldn’t pay off a credit card bill of $2,470, it’s unlikely that she could put together bankruptcy fees. When the bank holding her debt sued her, she didn’t appear in court. Now they’re taking one-fourth of her wages.

These kind of stories become particularly horrifying when they involve subprime lenders. From the Times:

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.

http://blogs.alternet.org/speakeasy/2010/04/02/could-your-wages-be-garnished-personal-bankruptcies-spike/

[Captain Hilts]

1. 'Garnisheed'. nt

[marmar]

2. I think the "ee" is only in the present tense

[Captain Hilts]

5. This term has certainly evolved, hasn't it? This article is amazing. Credit card reform?!?!

[Cirque du So-What]

7. Actually...

A garnishment is a means of collecting a monetary judgment against a defendant by ordering a third party (the garnishee) to pay money, otherwise owed to the defendant, directly to the plaintiff.

http://en.wikipedia.org/wiki/Garnishment

The weight of evidence comes down on the side of calling the act 'garnish' and the person whose wages are tapped the 'garnishee.' I consider it improper form to refer to someone's wages getting 'garnisheed.'

[Captain Hilts]

9. This is a new use of the term. And wiki is dodgy....nt

[Cirque du So-What]

16. Is the Harvard Law Review 'dodgy' as well?

http://books.google.com/books?id=mZIqAAAAYAAJ&pg=PA917&lpg=PA917&dq=%22law+review%22+garnishee&source=bl&ots=4gFazVO3Fb&sig=FbGUR5HDnPzSuaQhZzxsNyaE89o&hl=en&ei=SBS2S_fiJIO78gbNwKHIBA&sa=X&oi=book_result&ct=result&resnum=7&ved=0CBoQ6AEwBg#v=onepage&q=&f=false

In the passage linked above, the person whose wages are being withdrawn is referred to as the 'garnishee.' The burden of proof that this is a 'new use' of the term is upon you to prove.

[notadmblnd]

3. Not if you don't have any.

[KansDem]

4. Debtors' Prison

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.

It seems to me if the fuckers take $10,000 from your paychecks to cover a $4,097 debt, you've paid it off and more!!! Fucking banks!

[SOS]

6. $4,097 loan

After seven years and $10,000 in pay garnishments, the man still owes $3,965.
They've robbed him of ten grand and the principal has only gone down by $132.

It's depressing to see a hard-working man being ripped off by these vicious Wall Street parasites.

[closeupready]

10. What's worse is knowing Congress backed them up by passing their baby Bankruptcy Deform.

:mad:

[laughingliberal]

20. What's really delicious, though, is how this is now backfiring on them

The new law made it more difficult to file Chapter 7 and discharge the debt. They sought to force people into Chapter 13 where they would have to continue to pay something towards the debt for a period of time. With the tanking of the economy, for which the financial institutions were largely responsible, most filers now have low enough incomes to file Chapter 7. Give the bastards enough rope....Lol. They famously overreached.

[closeupready]

22. Yup. I agree.

While I have always believed that debtors have to respect their commitments and obligations, if they can, I have just about zero sympathy for banks and creditors these days. Z. E. R. O. Most of them got TARP money to bail THEM out of their risky gambling.

Meanwhile, the American taxpayer may be overextended, but kept their nose to the grindstone, saved money, protected their credit - and when the hammer dropped in 2008, they ended up completely on their own. Still are.

Every time I see Jamie Dimon lecturing the American taxpayer about personal responsibility, I can't tell you how much I just want to :puke:

[Captain Hilts]

12. It's one thing to have a debt. It's another to not be able to get out of it because of a rip off.

And that rip off is legal.

[closeupready]

8. In my opinion, it makes sense to file Chapter 7 prior to starting a new job,

if you need a fresh start and you either rent or you are willing to let your house go.

If people were corporations, they would.

[laughingliberal]

18. That's exactly right

We are planning to file Chapter 7 and, for now, are not keeping any money where it is attached to our SS numbers cause they can seize bank accounts, too. It's a little easier to do this being self employed. We keep just enough in the bank accounts for a couple of expenses we have to pay out of it. We just make sure we keep very good records of what we're being paid by customers for our tax purposes.

And all states have an amount of equity the homeowner can protect from creditors. Here, it's $300,000 in equity which can be protected. I see no reason for anyone who is struggling to not file bankruptcy. Delinquencies stay on the credit report for 7 years and, if there are payments which got behind 90 days, it limits the ability to get credit just about as drastically as bankruptcy. Bankruptcies stay on the report for 3 more years but give people more of a chance to get back on their feet.

[closeupready]

21. Absolutely. Good for you. I wish you all the luck in the world on starting fresh.

:) :hi:

[Captain Hilts]

11. This is a VERY important topic and I don't want to derail it. nt

[Robeson]

13. You can keep your home under Chapter 7, if you have little to no equity in it....

...and are current with mortgage payments. In fact, under chapter 7 - if you qualify - you can keep personal property up to a certain amount, your home, and have your debt completely wiped out. You do have to continue payments on your home mortgage.

on edit: alimony and child support cannot be discharged, either.

[closeupready]

14. Depends on the state in which you reside, doesn't it?

I think Florida and Texas both exempt primary homes from liquidation, don't they?

[Robeson]

15. You're correct, I should have stated laws can vary from state to state.

[laughingliberal]

19. True. Most BK attorneys are doing free consultations & will explain the laws of the state

We spoke with one last year and will file soon. In our state (Nevada) a homeowner can protect up to $300,000 in equity on their primary residence. The way the housing market dumped here there would not be too many, if any, with more than $300,000 in equity here.

[Commie Pinko Dirtbag]

17. In Brazil, primary homes are exempt from liquidation too. -nt

[frustrated_lefty]

23. I'm just finishing up filing chapter 7.

It's not something I'm proud of. Losing everything to Katrina, re-building a life, going through divorce just became too much. I don't own a home or a vehicle. My single most costly possession is a 4 year old computer which I actually need for work purposes.

Anyway, the point I wanted to make is that if you shop around for a bankruptcy attorney, some are willing to allow you to make payments over 6 or more months rather than demanding a lump sum. Of course, they won't file until you've completed the payment in full, but will get the creditors off your back as long as you make the payments reliably. In my case, monthly payments towards chapter 7 were less than the payments I was scrambling to make to debtors. It certainly beats having your wages garnished.