What you need to know about garnishment of joint accounts in Minnesota

December 30, 2010 by Todd Murray · Leave a Comment 

The garnishment of joint bank accounts in Minnesota has generated considerable controversy–and litigation–over the last few years. Here’s what you need to know if your joint bank account has been garnished by a debt collector:

In the 2007 case of Enright v. Lehman, the Minnesota Supreme Court ruled that a creditor can only garnish money from a joint bank account that belongs to the judgment debtor. So, for example, imagine that two people, let’s call them Rocco and Ani, have a joint bank account. Rocco has a judgment against him and a debt collector garnishes the joint account. Under the Court’s ruling, the debt collector could only garnish money from the account that belonged to Rocco. The debt collector wouldn’t be able to garnish any money in the account that belonged to Ani.

Unfortunately, the Enright decision left a number of questions unanswered. First, and most importantly, could a debt collector ever garnish a joint account when not all the account holders were judgment debtors? And if so, who was responsible for establishing what money in the account belonged to the judgment debtor–the creditor or the debtor? In a 2010 decision, the Minnesota Supreme Court answered these questions, and the answers weren’t favorable to Minnesota consumers. The Court ruled that a creditor could garnish a joint account, but could only keep the money that belonged to the judgment debtor. The Court also ruled that all of the money in a joint account was presumed to belong to the judgment debtor unless he and the joint account holders showed otherwise.

But what about the non-judgment debtor account holder? Is it really fair to her to have her money frozen while the garnishment process plays out and the ownership of the money in the joint account is established? Most of you have heard of the concept of “due process”. What that generally means is that before the government can deprive a person of rights or property, the person has to be given notice and an opportunity to be heard on the issue. But when a debt collector garnishes a joint bank account, the non-judgment debtor account holder doesn’t get any notice about the garnishment. Only the judgment debtor gets such a notice, and the notice doesn’t come until after the money has been frozen. And although Minnesota law allows non-judgment debtor account holders to be involved in the Court process, the debt collector isn’t required to notify the non-judgment debtor of her right to do so.  So is depriving the non-judgment debtor account holder of her money without any notice or opportunity to be heard a violation of her Consitutional right to due process? That’s the issue that will be before the Federal District Court of Minnesota this spring.

If the Court agrees that the current garnishment process violates the Constitution, it could have far-reaching implications on how debt collectors can collect money. Stay tuned.

If you still have questions about garnishment, feel free to download my free guide How to Survive Garnishment. It’s packed with information and tips for handling garnishment and will answer most of your questions about the garnishment process. If the guide doesn’t answer all of your questions, I offer 30 minute consultations for $175.

And if you’re being garnished and were never served with a lawsuit, I may be able to help you stop the garnishment by vacating the underlying judgment. Feel free to use the contact form in the upper right corner of this page to contact me to discuss the possibility of getting the judgment vacated.

Photo: http://www.flickr.com/photos/your_teacher/1040476355/

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

If you still have questions about garnishment, feel free to download my free guide How to Survive Garnishment. It’s packed with information and tips for handling garnishment and will answer most of your questions about the garnishment process. If the guide doesn’t answer all of your questions, I offer 30 minute consultations for $150.

And if you’re being garnished and were never served with a lawsuit, I may be able to help you stop the garnishment by vacating the underlying judgment. Feel free to use the contact form in the upper right corner of this page to contact me to discuss the possibility of getting the judgment vacated.

New York Times story highlights the importance of answering a debt collection lawsuit

April 12, 2010 by Todd Murray · Leave a Comment 

The New York Times recently published a story about the increase in wage garnishments due to the sour economy. The story tells the story of two struggling consumers who’ve had their wages garnished to pay back their debts. One man, who owed just over $4,000, actually had over $10,000 taken from his paycheck due to accrued interest and fees. But the lesson here–at least in my mind–is that in many cases, these garnishments can be prevented:

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 …. 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.

I’ve written extensively about the importance of answering a collection lawsuit, but I’ll repeat the message again: if you’ve been served with a collection lawsuit in Minnesota, you MUST answer the lawsuit within 20 days or the creditor will win the case without a judge ever seeing it. In most cases, the creditor’s next step is either a bank or wage garnishment. Even if you believe that you owe the debt, you’re entitled to answer the lawsuit and force the creditor to prove their case.

If you live in Minnesota and want help answering a debt collection lawsuit, feel free to contact me by using the contact form in the upper right corner of this page. I offer a number of flexible representation options, so even if you can only afford to pay a few hundred dollars, I might be able to help you.

Pay Garnishments Rise as Debtors Fall Behind | New York Times | April 1, 2010

What should I do when a debt collector gets a judgment against me?

February 24, 2010 by Todd Murray · Leave a Comment 

In a debt collection case, a judgment is a court order that you owe the creditor money. A judgment gives the creditor the power to garnish your bank account and wages. It has a negative impact on your credit score. And in some cases, creditors will exercise their post-judgment power to seize some of your personal property and have it sold to pay the debt. Having a judgment against you is an unpleasant situation to be in and is one of the main reasons why it’s so important to answer the summons and complaint. If a creditor has a judgment against you, here are some of your options:

  • Consider a motion to vacate the judgment. If the judgment was obtained by default, you may be able to bring a motion and eliminate the judgment. This will give you a chance to defend yourself. Think of it as a do-over. But you’re only able to get a judgment vacated in very limited circumstances. A consumer lawyer can help you decide if a motion to vacate is right for your case.
  • Negotiate a settlement or payment plan. If a motion to vacate the judgment is not appropriate in your situation, your options are pretty limited because the time to dispute the debt has passed. In many cases, your best choice may be to engage the creditor and arrange for payment. That may be the only way to avoid the stress and inconvenience of garnishments. Good deals are hard to come by after judgment because you’ve lost most of your leverage. But if you can demonstrate a significant financial hardship, or have a lump sum of cash available, you may be able to get the creditor to knock a decent chunk of the balance off.
  • Remember that the FDCPA applies even after the judgment is entered. So keep a record of all the conversations you have with the debt collector and save all letters and voice mails from them. And if you think that a debt collector has violated the FDCPA, consider talking to a consumer lawyer about the situation.
  • If all else fails, bankruptcy may be your best option. If the judgment is for a significant amount of money, or if you have multiple judgments, your best choice may be bankruptcy. Consider talking to an experienced bankruptcy lawyer to figure out whether bankruptcy is right for you.

If you live in Minnesota and want help dealing with a debt collection judgment, feel free to contact me by using the contact form in the upper right corner of this page. I offer a number of flexible representation options, so even if you can only afford to pay a few hundred dollars, I might be able to help you.

(photo: Xurble)

NY Attorney General sues to vacate thousands of improperly obtained debt collection judgments

July 27, 2009 by Todd Murray · Leave a Comment 

Andrew M. Cuomo, the New York Attorney General, filed a lawsuit last week that named 35 debt collection law firms as defendants. The suit alleges that over 100,000 default judgments obtained by these debt collectors may have been obtained by fraud because the consumers were not properly notified of the lawsuits and given a chance to defend themselves. According to the suit, the debt collection law firms all used the same process server, American Legal Process, to serve the lawsuits. The suit alleges that ALP “repeatedly and persistently” falsified sworn affidavits that it had given proper notice of the lawsuit to consumers. There are multiple allegations of ALP process servers serving two or more people in different places at the same time. Since the consumers had no notice of the lawsuits, they did not respond to them. This resulted in thousands of court ordered default judgments. The debt collection law firms used these judgments to garnish the consumers’ bank accounts and wages. The average amount seized from each consumer was over $5,000.00.

The lawsuit is silent about whether the collection law firms knew about the falsified affidavits. My guess is that they didn’t, but I also imagine that they didn’t ask too many questions about ALP’s practices and procedures as long as their services kept the money rolling in.

New York Times: N.Y. Claims Collectors of Debt Used Fraud (via CL&P blog)