Star Tribune story on lack of judicial oversight for garnishment process
September 2, 2010 by Todd Murray · Leave a Comment
Continuing its excellent “Hounded” series, the Star Tribune ran another story last weekend about the gaps in judicial oversight for the bank and wage garnishment process in Minnesota. The story points out that Minnesota law authorizes garnishments before the debt collector’s lawsuit has even been filed with a court. And even when the debt collector does file the lawsuit with the court before garnishment (and most do), the garnishment process happens largely without any judicial supervision. Only when the debt claims an exemption and requests a court hearing, does the court get involved. The piece tells the story of a couple of consumers that have had a particularly difficult time navigating the exemption process.
After reading the story, I’m even more convinced that Minnesota needs to prohibit any garnishments before filing, and allow pre-judgment garnishment only with a court order. I’ve written about it in the past, but I’d also like to see the existing exemption process blown up, and a new process put in place that prevents creditors from freezing exempt money, even if it’s only for a few days. And as the story points out, states like North Carolina and Texas have created exemptions for money earmarked for reasonable living expenses. But in an allegedly progressive state like Minnesota, there’s no such protection–creditors can garnish money that you’ve earmarked for your basic living expenses, leaving you out of luck.
Justice denied as debt seizures soar | Star Tribune | September 1, 2010
Claiming garnishment exemptions in Minnesota
June 29, 2009 by Todd Murray · 1 Comment
Editors’ note: this post only discusses exemptions in Minnesota. For a detailed explanation of exemptions in another state, please consult with a consumer attorney in your area.
Without question, dealing with garnishment is the most frustrating aspect of debt collection for consumers. Whether it is a bank or wage garnishment, having a debt collector seize your hard-earned money is a significant disruption to your life and can cause a great deal of stress. But many sources of funds are exempt from garnishment, which means that a debt collector cannot keep those funds.
In Minnesota virtually all forms of need-based government aid are exempt from garnishment. Some of the most common forms of need based aid are social security, supplemental security income (SSI), energy assistance, and medical assistance (MA). Other types of need based aid that are exempt include: Minnesota family investment program (MFIP), emergency assistance and emergency general assistance (EA & EGA), work first program, general assistance medical care (GAMC), and Minnesota supplemental assistance (MSA). This is not an exhaustive list and virtually any form of government aid that you receive based on your income is probably exempt from garnishment under Minnesota law. Other common Minnesota exemptions include any money you receive for child support, unemployment benefits, workers’ compensation, and veterans’ benefits. Some of the less common exemption sources of funds include retirement pensions (up to a certain dollar amount), disability, and insurance proceeds for damages to exempt property (usually your home or vehicle). And while its not technically an exemption, under current Minnesota law a debt collector cannot seize funds from a joint account that do not belong to the judgment debtor.
In addition, a debt collector may only seize 25% of your after-tax wages through a wage garnishment. This exemption also applies if the debt collector garnishes your bank account after you deposited your pay check. But if you make only the federal minimum wage (or less) your wages are usually completely exempt from garnishment. And if you receive any form of need-based aid, such as those described above, your wages are totally exempt from garnishment. Minnesota law provides for this exemption if you currently receive need-based aid, or if you received any need-based aid in the last 6 months. This is an important provision for Minnesotans receiving energy assistance. Most recipients of energy assistance receive it from October through March, which would make the recipient’s wages exempt for the entire year if she re-enrolls in the program the following season.
To claim an exemption, it is important first to understand the garnishment process. This post gives a general overview of how the process works. For a wage garnishment, the debt collector must provide you with a form notifying you of their intent to garnish and an exemption form 10 days before starting the wage garnishment. To claim an exemption from a wage garnishment, all you have to do is note the appropriate exemptions on the exemption form and mail it back to the debt collector. Its critical to do this immediately, or at least within 10 days of receiving the form. You should also provide proof of your exemption, such as your benefit notice, with the exemption form.
For a bank garnishment, you will not get notice of the garnishment until 5 days after the bank seizes your funds. Fill out the exemption form that the bank and debt collector mail to you, noting the appropriate exemption. You also need to provide proof that the funds that were seized by the bank arose from an exempt source. This last point is the cause of considerable confusion for consumers. Its not enough to show the debt collector that you receive exempt money, you also have to prove that the funds that were actually seized contained this exempt money. Debt collectors will refer to this as “tracing”. Sending the debt collector a copy of your bank statements that show the deposit of exempt funds, along with your benefit statements will usually accomplish the task.
If you merely mail the completed exemption form to the debt collector, and fail to provide the required tracing, the debt collector will probably object to your exemption and refuse to return your money. If this happens, you should schedule a court hearing in front of a judge to determine whether your funds are exempt. Court administration will help you set up the hearing and provide notice of the hearing to the debt collector. On the day of your hearing, be sure to bring proof of your exemption AND bank statements proving the funds seized were from an exempt source. Failure to do so could delay the court’s decision or could lead to the court denying your exemption.
Finally, its important to note that claiming an exemption when you are not entitled to one could lead to the court ordering you to pay a penalty to the debt collector. Make sure any exemptions you claim are legitimate.
Feel free to download my free guide: How to Survive Garnishment. It’s packed with information and tips for handling garnishment. And if the guide doesn’t answer your questions, I offer 30 minute garnishment consultations for $150.00. Please click here to contact me and set one up.
Garnishment in Minnesota
May 11, 2009 by Todd Murray · 1 Comment
Editor’s note: this post only discusses garnishment in Minnesota. Although the laws and procedures may be similar in other states, you should consult with an attorney in your area for specific advice about your state’s garnishment laws.
In Minnesota, debt collectors are allowed to garnish a consumer’s bank account and wages to recover unpaid debts. Although Minnesota law permits garnishment before the entry of judgment in limited circumstances, the majority of garnishments occur after a court judgment has been entered.
To initiate a bank garnishment, a debt collector first sends a garnishment summons to the bank. The bank is required to seize all funds in the consumer’s bank account on the day they process the garnishment summons. Consumers do not get notice of the garnishment until after the funds have been seized, which unfortunately can result in bounced checks and overdraft fees. In contrast, a wage garnishment is initiated by first sending a notice of intent to garnish to the consumer. The debt collector must then wait 10 days before sending a garnishment summons to the consumer’s employer. Upon receipt of the garnishment summons, an employer must seize 25% of the consumer’s after tax earnings for each pay period until the debt is satisfied.
What should you do if your bank account or wages are being garnished? First, determine if any portion of the funds that were seized are exempt. Minnesota law provides that certain sources of funds are exempt from garnishment. For example, a debt collector may not keep most forms of need-based government aid, such as social security or energy assistance. In addition, a debt collector can only keep up to 25% of your wages, even after you deposited them in your bank account. Minnesota law also provides that child support, some insurance settlement proceeds, and many pension plans are exempt from garnishment. This is not an exhaustive list of exemptions and you should consult with a consumer lawyer to determine what, if any, exemptions you may claim. A consumer lawyer can also help you navigate the process to claim an exemption and get your exempt funds back. It is critical to act quickly because Minnesota law provides very stringent deadlines for claiming an exemption and if you fail to act in the required time, you may lose your ability to claim an exemption. 6/30/09 update: for more information on garnishment exemptions in Minnesota, see this post.
Another thing to consider if your bank account has been garnished is whether any of the funds that were seized belong to a joint account holder, such as a spouse or child, who has nothing to do with your underlying debt. Under current Minnesota case law, a debt collector may not keep funds in a bank account that were contributed by a joint account holder who is not responsible for the debt. And there is at least one Minnesota court that has ruled that a debt collector that seizes a joint account holder’s funds to satisfy a debt they aren’t responsible for may have violated the Fair Debt Collection Practices Act, or FDCPA, and other Minnesota laws.
Finally, you should consider whether its possible to get the underlying court judgment vacated, or removed. If the judgment was obtained by default and you were never served with the lawsuit, you may be able to have a court vacate the judgment and return the garnished funds to you. Its also possible, under certain circumstances, to get a default judgment vacated even when you were properly served with the lawsuit. Consult with a consumer lawyer to determine whether you have a viable motion to vacate the default judgment.
Feel free to download my free guide: How to Survive Garnishment. It’s packed with information and tips for handling garnishment. And if the guide doesn’t answer your questions, I offer 30 minute garnishment consultations for $150.00. Please click here to contact me and set one up.
(photo: stuart pilbrow)
Advice for dealing with debt collectors
April 3, 2009 by Todd Murray · Leave a Comment
Don’t tell a debt collector where you bank or work.
This information is very valuable to a debt collector because bank and wage garnishments are easy and cheap ways to collect debts. Never voluntarily give this information to a debt collector. A favorite trick debt collectors will use to get you to tell them this information is to say “I already know you bank at ABC Bank.” Surprisingly, many people will reply “No I don’t. I bank at XYZ Bank.” Don’t fall for this trick.
Keep accurate records of all communications with debt collectors.
If you talk to a debt collector on the phone, immediately after hanging up, write down everything that was said during the conversation in as much detail as possible. Sign and date these notes. If a debt collector violates the FDCPA, your notes can be used as evidence of the violation. Similarly, be sure to keep every letter sent to you by a debt collector, including its envelope.
Demand that the debt collector confirm any agreement in writing.
If you agree to a payment plan or settlement with a debt collector, before sending any money, demand that the debt collector confirm your agreement in writing. It’s not unheard of for debt collectors to try to back out of payment agreements. Also, if a debt collector gives you an extension of time to make a payment or to respond to something, make sure they confirm that agreement in writing.
Avoid long, open-ended payment plans.
Debt collectors will usually agree to monthly payment arrangements on the full balance, plus accrued interest. If possible, avoid this type of payment plan. With the high interest charged by most credit card companies, you will be paying the debt back forever. If possible, negotiate a fixed amount and term. This way you know exactly how much you’ll be paying and for how long.
If you are sued, talk to a consumer lawyer immediately.
A debt collection lawsuit is serious business. Unless you are well-versed in the rules of civil procedure and have a good understanding of the deadlines involved in litigation, you should strongly consider getting advice from a consumer lawyer. I’ve seen many cases where consumers chose to represent themselves, had strong defenses, but ultimately lost because they failed to follow a court rule or meet a deadline.
(photo: Daveybot)
