More Lenders Are ‘Garnishing Wages’ To Get Paid Back

[Purveyor]

If you’ve fallen behind on credit-card, medical, or other debt, there’s a growing likelihood that the lenders will simply help themselves to the contents of your paycheck — or even your bank account — to get their money back.

You read that right. Wage garnishment — typically thought of as a tool for collecting unpaid child support or back taxes — is increasingly being wielded by lenders and collection agencies, and it’s hitting middle class and blue-collar workers the hardest.

“The impact is often humiliating and stressful for employees. It can result in decreased productivity and motivation that can be detrimental to the affected employee, workplace, and employer,” payroll giant ADP says in a report about garnishment conducted at the request of ProPublica.

According to a joint investigation by NPR and ProPublica based on the ADP data, roughly 4 million working Americans had their wages garnished to pay off a consumer debt last year. For those earning between $25,000 and $40,000, consumer debt was the main reason for garnishment. Employees of manufacturing companies are more likely to be hit by garnishments, as are residents of Midwestern states.

These aren’t small amounts, either. Although some states limit how much can be garnished, a creditor can take up to 25% of your paycheck in more than half the country. What’s even worse is that debtors whose pay is garnished are likely to wind up paying back far more than the original debt owed, because creditors are free to tack on penalty fees, hike the APR on the balance, add their own legal costs onto the balance.

more...

http://time.com/3422329/wage-garnishment-lenders-going-after-paychecks/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+time%2Fbusiness+%28TIME%3A+Top+Business+Stories%29

[badtoworse]

1. Simple solution: If you're carrying debt, pay it off.

[tkmorris]

2. Overly simple solution

[badtoworse]

5. If you're going to lose part of your check to a garnishment,...

...why not save yourself the embarrassment and just pay that amount? I can understand being unable to make payments on debt if you're unemployed, that is not the situation here. If you have a job and owe money, not making payments on the debt is wrong.

[AZ Progressive]

14. In other words, choose to pay your debt rather than eat

[badtoworse]

20. If you're dealing with a potential garnishment, a judge will decide how much can be garnished.

I doubt a judge would approve a garnishment if that were the choice. On the other hand, if the judge does approve the garnishment of a certain amount, it indicates to me that you are in a position to be paying your creditors, but are just not doing so.

The bottom line is if you have a job and owe money, paying your creditors isn't optional.

[hobbit709]

21. I know someone that had $2 of her $8.25 wages garnished

She was barely breaking even BEFORE that $40/wk disappeared.

[badtoworse]

24. There are two sides in a situation like this, which is why a judge makes the call.

How did she get into debt? If she maxed out her credit cards on stuff she really couldn't afford and then stiffed the credit card company, I don't have much sympathy and I doubt a judge would either. I'd be a lot more sympathetic if getting into debt was beyond her control - say her kid was sick and she couldn't pay the bills.

[hobbit709]

25. You're just full of sympathy for the less fortunate aren't you.

It wasn't credit card debt.

[badtoworse]

28. It's not just a matter of sympathy; there is also an element of fairness.

It's easy to point to a situation like you described and claim that garnishing her wages is unsympathetic. Maybe that's true - I don't know the facts. At the same time, there really are deadbeats in this world - do they deserve sympathy? Creditors have rights too. Somebody has to decide who's a deadbeat, who isn't making enough to pay off a loan and what is fair to the creditor and the debtor.

[ms.smiler]

37. badtoworse, it’s a pity you lack an understanding of the debt collection racket.

As an honest business person, I use the appropriate word “racket” rather than industry as I am unable to recognize legitimate commerce in their transactions.

I imagine you think that banks and credit card companies put their own money at risk by funding purchases of televisions, clothing, automobiles, home goods, etc. If so, that’s incorrect. Car loans, student loans, mortgages and credit card debt are all funded the same way - by investors in securities.

All sorts of debt is sliced and diced, bundled into securities and sold to investors. Their money funds new loans and credit cards. Consumers might pay say Citi Card and think they are paying the lender but they are not. The payment ultimately goes to investors and Citi, with no money at risk, is guaranteed to make money from large fees and commissions for managing the investments.

When an alleged or actual default occurs, insurance known as Credit Default Swaps may pay the investors and Citi as well. Citi might sue the consumer but it’s more likely they will sell the debt collection rights to a debt collector for .03 to .05 on the dollar. That company will seek a windfall and attempt to collect or sue for 100% of the original debt amount plus fees and often illegal amounts of interest.

When these companies sue they usually don’t have lawful proof of the debt including a contract and full accounting of the alleged debt. Just as in mortgage foreclosure, these companies will submit robo-signed Affidavits to courts as proof of the alleged debt and default. If the consumer does not defend, a default judgment is likely despite the unchallenged fraud and the resulting judgment can be executed against property, bank accounts and paychecks.

If you borrow $20 from a coworker at lunch, it’s a valid and honest debt which you should do your best to repay. But if you are purchasing a mortgage loan, a car loan or making purchases with a credit card, it would be prudent to understand the full nature of the transaction and how our financial industry operates and how they misuse our courts.

You would be mistaken if you suspect or believe that debt collectors or banks or credit card companies, (banks again) make the investors whole from the money collected or garnished from consumers.

Tell me please, can you identify anything fair in this scheme?

[badtoworse]

52. In the end, someone got stuck with a defaulted loan.

If Citi sold the defaulted loan for $0.03 on the dollar, they lost $0.97 and wrote it off. If a Credit Default Swap is triggered, then the swap counterparty ate the loss. The swap premium gets rolled into the lenders' or credit card company's cost of doing business which ultimately gets borne by consumers that pay fees on their credit cards. Higher swap premiums mean higher borrowing costs for everyone. The fact is that these losses were triggered by someone borrowing money and not paying it back and you are right, that is not fair.

The fact that the loan got sold is irrelevant, as is its value in the secondary market. You still owe the money and are expected to live up to the terms of the transaction - sorry, but that's just how a contract works. The fact that your loan got sold for pennies isn't a reflection on the lender or the collection agency; it's a reflection of your performance under the loan. If your loan is worth pennies, it's because you're in default. I've never seen a contract where default did not have serious consequences and I don't see why a loan or consumer debt should be an exception.

I do agree with one thing you posted:

"But if you are purchasing a mortgage loan, a car loan or making purchases with a credit card, it would be prudent to understand the full nature of the transaction and how our financial industry operates and how they misuse our courts."

A loan or the use of a credit card is a legally enforceable contract and the onus is on the borrower to understand the deal. The fundamentals aren't that hard to grasp: If you borrow money and ignore the obligation to repay the loan, at some point things are going to get pretty unpleasant for you.

You haven't mentioned anything about the borrower's responsibility in all of this. What do you believe is reasonable to expect from a borrower? Do you think they should be able to walk away from a loan with no consequences?

[ms.smiler]

57. badtoworse, I’m delighted to discuss these issues with you.

I’m sure we’ll find areas where we agree and where our views differ.

You wrote:

“If Citi sold the defaulted loan for $0.03 on the dollar, they lost $0.97 and wrote it off.”

I won’t guess at what they get to write off, but in addition they are picking up .03 for every dollar on a loan funded by investors. That’s simply the price of collection rights and not a reflection on consumers and their performance under their loans.

Next, you wrote about a swap counterparty loss and how ultimately consumers are burdened by the premium costs. I can’t explain how it’s fair for consumers to pay higher interest rates so some other party’s insurance premium is paid. No one pays my insurance premiums except me.

I don’t share your view that the sale of the loan is “irrelevant.” You wrote: “You still owe the money and are expected to live up to the terms of the transaction - sorry, but that's just how a contract works.”

We’re using Citi as an example so let’s say the consumer had a contract with Citi but they sell the collection rights to let’s say Midland Funding. Neither Citi nor Midland loaned the consumer any money, and the consumer didn’t have a contract with the actual lender or Midland, did they? The consumer though would be lawfully obligated to repay Midland exactly what they paid for the collection rights plus lawful interest, not the original amount of the loan; otherwise Midland would be unjustly enriched.

You’ll delight I’m sure as I state that I believe individuals and businesses should do their very best to repay all lawful and valid debts. In my earlier post I stated that a $20 loan from a co-worker at lunch should be repaid if at all possible.

So let’s now suppose I bought the collection rights to that $20 loan from your co-worker for .60. I’m adding fees and high interest and the new total is now $33.70 which I expect you to pay me. I won’t offer you any evidence of what I paid for the right to collect or any proof of the loan or an accounting of the loan. Really, there is nothing at all to prove you owe me the money, yet it appears you would like people to believe that in this scheme you would lawfully and properly owe me the $33.70 that I claim. My view is that if I could prove the debt and the amount I paid, the .60 is the extent of my damage plus some lawful interest, say .07, and if I was contractually entitled to obtain money from you, you would actually owe me a total of .67.

But then you never borrowed money from me and we never had an understanding, agreement or contract. And if you pay me the $33.70 I’ll put it my pocket which does nothing to return $20 to your co-worker.

In this scheme there is no contract between the actual lenders and borrowers, there are only parties positioned to profit from the transactions and unjustly enrich themselves. The collection of debts simply enriches Hedge funds, banks and debt collectors and does nothing to repay the actual lenders who are investors who knowingly put their money at risk in investments.

In my view, either lawful amounts of debt should be collected from borrowers or the money should be repaid to the investors if the Swaps have paid or are not utilized, otherwise investors would be twice paid.

I believe it’s reasonable for a borrower to expect an honest system and absent an honest system; they should be relieved of no more wealth than is lawful.

No, in the end no one got stuck with a defaulted loan. Investors either came away with some wealth creation or suffered an overall loss. Banks profited from managing securities, selling collection rights, write offs, insurance, collections on loans they never funded, and Hedge funds and debt collection companies collected and kept billions after spending mere millions for debt collection rights.

In the end it all amounts to the transfer of trillions of wealth from the people who work hard and EARN it and create wealth to people who simply devised a means to transfer and amass that wealth without working and earning a cent.

[badtoworse]

68. You're overlooking a few points

First and foremost, the borrower took out the loan and agreed to pay it back under the terms of the agreement. That last part is important for two reasons: First, the agreement defines the consequences if the borrower defaults on the loan. By agreeing to those terms, the borrower agrees to pay the stated fees and penalties in the event they default. Secondly, under the agreement, the lender would reserve the right to assign the loan to a third party under whatever terms are agreed to by the lender and the third party. As a result, the borrower's obligation to repay is intrinsic to the loan itself and does not depend on who is holding the loan. In addition, the lender does not need your approval to assign and the terms under which the loan is assigned are none of your business. That's the deal. If you don't like it, then negotiate a different deal (good luck with that) or don't borrow the money. If you do agree to those terms, don't whine about how unfair it is if things go sour for you. Borrowing money is a big deal. If you don't understand the terms of the loan, you shouldn't agree to it and you are pretty stupid if you do so.

Let's consider who gets hurt in a default situation. Regardless of who is holding the loan, whoever eats the loss in a default situation is going to write off that loss on their taxes. If you default on a $100 loan and the holder of the loan writes it off, that is $35 in federal income tax they don't pay, so we all take a hit on that. If a Credit Default Swap is triggered, the swap counterparty pays off the loan to the bank and gets the defaulted loan in return. The bank is kept whole, but because it no longer holds the loan, it can't be paid back twice. The swap counterparty still eats a $65 loss which it makes up with the swap premiums. Who pays the swap premiums? Initially banks do, but ultimately, borrowers do in the form of higher of higher loan or credit card fees.

Let's say the holder of the loan sells it to a collection agency for $0.03 on the dollar. That $0.03 value is based on the cost of pursuing collection as well as the likelihood of collecting anything. In this situation, the bank or swap counterparty would write off a little less and the collection agency would pay tax if they make any money on the loans. That $0.97 loss in the value of the loan was triggered by the borrowers failure to honor the contract. There is no basis to argue that the borrower's obligation to pay off the loan should be reduced to $0.03 nor would there be any fairness if that were to happen.

I don't see any racket here. Banks and credit card companies are in business and that means they are going to protect their own interests and structure loans in a way that does that. If the penalties for default are too severe, then the fix is set reasonable legal limits; not let the borrowers off the hook because the lenders are protected. No one forced the borrower to take out the and in the end, we're the ones who get burned by the ones who default.

[ms.smiler]

83. badtoworse, I’m enjoying our discussion, thank you.

So a borrower signs a contract and obtains a loan. The character of the transaction is not explained or revealed to the borrower and the true lender is not mentioned anywhere in the contract. (I’m old fashioned I suppose but I think the contract should include the actual lenders and borrowers rather than fictitious lenders.) The borrower is actually a party to the loan securitization as Bank of America has admitted but are never informed of their involvement nor do they consent in the contracts.

So we have a borrower in a contract with a party who is actually a stranger to the transaction and the borrower comes away, by design, falsely believing the named party in the contract is funding their loan and will be owed money. At the very least this is a deceptive business practice to me but you have to remember I consider myself an honest and actual business person.

At some point during the life of the loan, the borrower ceases making loan payments. The borrower may have been sending payments to Citi or whomever and has no idea that their money has ultimately been flowing to investors.

Let’s review other matters beyond the view, knowledge and consent of the borrower and beyond the four corners of their contract.

The borrower has no idea if their securitized loan was in the top, middle or bottom tranche. They have no idea how the P&S agreement dictated how payments were applied to the pool of loans and how it impacted their loan balance. The borrower has no idea if a swap is triggered and the investors are made whole and their loan is extinguished. Moreover, the borrower has no idea if a swap also paid to Citi or whomever, a party who derives profit upon the cessation of the borrower’s loan payments.

And yes, somewhere in this scheme there is a counterparty who placed a bet and they fund the swap that makes the investors whole and moves as profit to Citi or whomever. Any subsequent collection success does not reimburse this counterparty for their loss just as it would not make investors whole.

After Citi or whoever briefly attempts to collect, the collection rights are sold to another party, a debt collector who never funded the loan but supposedly obtains the consumer’s contractual obligations. The debt collector actually damaged themselves by willingly paying .03 on the dollar for collection rights and legally they are only entitled to collect the amount to the extent of their damage, not the alleged and false total amount.

The debt was actually extinguished with insurance, remember? The borrower though is never provided a full accounting of the loan and is instead burdened with an inaccurate, partial and false accounting of the loan balance that was intentionally and separately maintained for them. And that false amount is what the debt collector attempts to collect.

By the time a debt collector contacts the borrower, the debt could have been paid a few times over and the actual debt extinguished. But because the borrower signed a contract, and rights passed to another party along with a fictitious loan balance, you believe the borrower should simply trust the debt collector and pay whatever amount they claim is owed.

Here is where your view appears to be that the borrower agreed in their contract to repay the claimed balance and not the actual loan balance which may in reality be zero dollars.

You don’t appear to have any qualms about this securitization scheme and subsequent debt collection practices. To me though, this scheme involves defrauding the borrower, deceptive business practices, unjust enrichment and no good faith or fair dealing. It’s a dishonest transaction and scheme designed so that various parties can be compensated over the same debt, even parties who never funded the loans, while burdening borrowers with the obligation to repay the loan yet again to an even stranger party to the original transaction.

Apart from unlawful practices in this scheme, I find it an unproductive and inefficient use of capital since loans can be funded in other ways without inflating interest rates and fees and without defrauding borrowers.

Billions are siphoned from consumers enriching debt collectors when the money could be put to use by those consumers purchasing goods and services.

Remarkably, this scheme is something you somehow view as business. I’ve got 28 years of experience in business and I believe a debt need only be paid once.

How many times do you believe a debt should be paid?

[badtoworse]

84. You have a lot of misconceptions about debt. I'll respond to a few of them.

The terms of a loan are always available to the borrower. If you take out a mortgage, you sign a loan agreement and the terms are in that document. Signing the agreement without reading and understanding it is pretty dumb. I wouldn't do that and I'd in the case of a mortgage, I'd have my attorney review it as well. That is just plain prudent - what would you do? In the case of a credit card, the term are included with the application and you agree to them when you sign the application. They're in fine print and probably difficult to understand, but they're still there.

The borrower has to be a party to the loan securitization. How else could the loan be secured? In the case of a mortgage, you agree that the lender has a lien on the house and can foreclose if you default. Same thing with a car loan.

Debt is assignable. If it were not, there wouldn't be a bond market. I'd be willing to bet that either directly or indirectly you are holding debt instruments, but you are not a party to the original transaction. Bond funds, secondary bond markets, etc. are only possible if the obligation to repay is intrinsic to the loan agreement, not the original parties to that agreement.

Debt is not extinguished if Credit Default Swap is triggered; it merely changes hands. The holder of the defaulted loan is paid what they are owed, but the swap counterparty gets the loan in return. The borrower still owes the money on the loan, but a different party is now holding the loan and that party is free to do whatever they can to collect on the loan.

You're mistaken if you believe that a debt collector buying your loan for $0.03 on the dollar changes what you owe under the loan. You might think you should have the right to settle with the debt collector for $0.03, but you don't. You can and should settle with the debt collector, but the settlement amount would be subject to mutual agreement.

[ms.smiler]

85. badtoworse, after hours per day on a daily basis of research into

mortgage/foreclosure/securities fraud for the past 6 years I don’t believe I have any misconceptions but I certainly realize there is even more for me to learn about the securitization scheme.

The terms are in the agreement yes, but the character of the transaction is not disclosed or explained to the borrower who is not informed they are a party to securitization and they are not informed of other unknown parties that will also have a contractual obligation to make payments on the loan. Do you expect the borrower to somehow divine this information and understand the ramifications from words that do not appear anywhere on the contract?

The creditor and borrower both have obligations in the contract. There is little opportunity for the borrower to learn the identity of their actual lender or the actual and correct loan balance. The borrower is never informed of the other parties who have a contractual obligation to pay on their loan. The borrower has no idea if their loan was lawfully assigned and securitized or if perhaps it was unlawfully pledged to numerous Trusts. (Ponzi - yes, the largest in history.) The borrower has no idea if a breach of the contract occurred on the creditor side of the transaction or if their loan was even lawfully assigned at some point subsequent to securitization.

And in 6 years of research, no one has yet been able to direct me to the law which governs how a security is converted back into a loan so at this point I’m tempted to conclude that once a loan is securitized, it remains a security and no longer exists as a loan.

As an example of unlawful assignment, MERS never bothered to lawfully create officers prior to 2012 so millions of earlier Assignments of Mortgage are actually invalid. But then after 6 years of research, I still haven’t found a single example of a lawful assignment to an MBS Trust.

As another example, it was Citi I think who ceased selling collection rights on credit card accounts for about a year, because their records were in such disarray that closed accounts and accounts in good standing were included with those accounts supposedly in default.

In a traditional mortgage loan the borrower is the only party with a contractual obligation to make the payments. In a securitized mortgage loan though, numerous parties may have a contractual obligation to make the payments, unbeknownst to the borrower and one of those parties is the debt collector, (the mortgage servicer.)

If a homeowner ceases making mortgage payments, they have no idea what other parties may be making the payments and that their loan is not truly in default when they receive foreclosure documents. Of course they are likely unaware that a breach of contract occurred on the creditor side of the transaction long before their cessation of payments.

When is a loan in default? When some party erroneously declares a supposed default or when all payments cease to be paid on the loan?

There is so much fraud that transpires on the creditor side in this scheme that by the time some debt collector contacts the consumer, no good paper remains provided there was even good paper at loan origination. No full and lawful accounting of the loan is provided to the consumer. Without spending a few thousand, the consumer has no way to know if their loan was lawfully securitized and there is no lawful proof of the assignment of the alleged debt provided to the consumer.

It’s absurd to me but this all boils down to faith based borrowing for consumers. You expect consumers to simply trust the middleman - the banks and that they have lawfully handled consumer loans, lawfully securitized them, lawfully maintained complete loan balances, lawfully converted securities back into loans, and lawfully assigned the debt. You appear to assume that banks take great care to insure that no investors or consumers are cheated at all in this scheme and that throughout this process, the debt remains valid.

Really? Are you that trusting?

Do you follow the news?

I sat in court one day and listened to an attorney for a debt collector explain to the court that banks destroy credit card applications, which is why he had no signed contract to show the court. The attorney did have a few copies of statements though which is about as much as any debt collector ever gets for their .03 on the dollar. I had assisted the Defendant who won of course.

I understood the bluff. It was no longer a valid debt.

Do you suppose what that attorney said is correct? If the debt was valid and the contracts were so important, why would banks destroy them? Why don’t debt collectors ever have signed contracts when they appear in court? Why do they never have proof the debt was assigned to them? All they have is a spoken claim to the right to collect some mythical loan balance for which they never have a complete accounting.

No consumer should pay or settle with a debt collector. This scheme is designed with no transparency at all for the consumer. The consumer has no way to know if the debt remains valid, if a valid assignment transpired, the identity of the assignee, or what actual, true and correct balance may remain.

It’s not a debt, it’s a scam. It’s sophisticated and it’s profitable for the banks regardless how the loan works out but remains a scam.

[brentspeak]

67. Citi and other loan-sharks charge and get paid usurious interest on the original loan

They don't "lose $0.97" on the dollar when a loan gets defaulted and then sell the debt to vulture parties; they've already made a healthy profit from the loan because borrowers have already paid many cycles of interest on the principal.

The fact that you omitted any mention of loan interest demonstrates that your post is transparent bull$hit.

[liberal_at_heart]

59. you want to talk about fairness? How about wages being suppressed for decades, unions being busted,

pensions going broke, cost of living sky rocketing, and CEOs making hundreds of times more than the average employee? Does that sound fair to you? If you ask me the real deadbeats are the 1%.

[kcr]

62. Everything is fair. Judges always make the right call. Nothing bad ever happens.

No problems. People can just pay their bills? Well, okay then. That was easy. Hey, everyone. More time on our hands. Let's party!

[badtoworse]

63. What an erudite response. What's your solution?

We have an employed borrower who is in default on his/her loan and a lender that wants to be paid back. How would you resolve the situation?

What I'm seeing here are mostly emotional arguments. Cite the most pathetic situations faced by borrowers and broad brush lenders in the worst possible light and you have a basis for letting borrowers walk with no consequences. Nobody says that in so many words, but that's the net result. What I rarely see on DU is an acknowledgement that yes, the borrower really does owe money and has an obligation to pay it back. Where do I have it wrong?

[kcr]

65. Knee cap them.

Lenders have to be paid, right? Fear is an excellent motivator.

[riderinthestorm]

71. 80% of bankruptcies are because of medical debt

A huge percentage of people in debt are there because of medical emergencies. I think the entire enterprise is built on corruption and exploitation.

In most cases, the interest and penalties far outweighs the original debt. Add in the usurious legal fees and its a racket.

Don't even get me started on student loan debt

[badtoworse]

72. IOW, no solution.

[kcr]

74. Recognizing a problem is the first step.

Pretending there is no problem and sticking your head in the sand is a guaranteed method of failure.

[riderinthestorm]

75. Single payer and free college education

Of course those two issues have been debated up the wazoo here on DU but you knew that.

[closeupready]

77. The idea of a fresh start is that in life,

misfortune happens; bad business decisions happen; major shit happens sometimes to people - actually, it's likely to happen to most people; and that it's better for society and the economy to occasionally step back and say, 'okay, we all need to take our losses, and move on, so that our neighbors and their families can have a second chance at building a solid foundation for the future.'

[badtoworse]

79. We already have that. It's called bankruptcy.

[closeupready]

80. Okay, so you're just here spoiling for an e-fight.

Have a nice day.

[badtoworse]

81. What's wrong with bankruptcy? It addresses exactly what you posted.

[tecelote]

27. And judges are angels sent our way to help.

Usury is rampant and our courts tend to side with business over people. A new phenomenon.

[badtoworse]

29. I guess it depends on whose ox is getting gored.

Around here, they're heros when they rule in favor of same sex marriage or against laws that restrict abortions. You have to take the good with the bad.

[tecelote]

30. True.

I believe most judges are good and honest.

But, not all.

[closeupready]

16. Duh. Two-income homes become one-income homes.

People get sick and run up medical bills. Overtime gets cut. Expenses rise while relative income remains static. If you had high bills BEFORE misfortune hit, you'll be struggling just to eat AFTER. Paying SOME of your creditors will not stop your OTHER creditors from suing you for nonpayment.

Geeze, this isn't that hard to understand if you really make a little effort at empathizing.

[Mariana]

61. Paying some of your creditors will not stop your other creditors

from suing you for non-payment. Indeed. Not only that, but if you can't afford the full payment and you try to make partial payments to them - if you send them something each month, in good faith, toward your debt, they'll still sue your ass.

[notadmblnd]

33. You need to give that lecture to the likes of Donald Trump and Mitt Romney

Habitual bankruptcy filers they are.

[hobbit709]

35. the only way you'd get them to pay attention would be with a clue by four.

[Hosnon]

7. Seriously? People lose jobs, have unexpected expenses, get sick, etc.

That is not a simple solution. That is a simplistic solution.

[LanternWaste]

9. More accurately, merely a 'simplistic solution'.

More accurately, merely a simplistic solution. Unless of course, one has all relevant and absolute knowledge of all lendees' financial statuses.

[notadmblnd]

34. you want to know what the simple solution is?

file bankruptcy. That will stop everyone but the Government from taking money out of your accounts.

[upaloopa]

18. And while you are at it save for retirement

and take public transportation and stop eating steak and lose the cell phone, computer and big screen TV. Did I miss anything?

[1StrongBlackMan]

31. Yeah ... you forgot ...

get rid of that refrigerator and who needs that air conditioning (tough it out)/heat (wear a sweat or 4)!

[gollygee]

44. Manicures

There's always talk of fingernails in conversations like this.

[bhikkhu]

51. Or, if you can't pay off loans, don't take out loans

I'm pretty much in agreement about paying off debt. I went through a pretty tough stretch of years before and after the recession, where I was making a decent check, but paying about every dime of it to keep up on bills, and scrimping to get by. I did keep up, enough to raise my credit score and re-fi my first and second mortgage and some of my student loans into one low-interest loan. Which saved me about $500 a month in payments. Now (with a better job to boot) everything is going just fine - money in the bank, money for extras and emergencies, and putting some away for retirement.

On the other hand, it wasn't without costs. My wife a few years ago was unemployed and had a credit card "problem", which I never knew the scope of since she hid the statements, and that sort of thing. One of the first things I did when she wasn't willing to talk about it or work out a plan, was to separate our finances, taking her off the house, and eventually getting an amicable divorce. I think she has something like 80k owed, though, again, she never wanted to talk about it.

I would be on the side of "pay it off", but I can't help but ask - what boneheaded bank would give a person with no job or assets $80,000, unsecured? I don't have a lot of sympathy with her (having other issues, of course), but I also have zero sympathy for the banks or the collectors in that kind of case.

[badtoworse]

53. I agree with you - consumer debt and even mortgages are entirely too easy to obtain

Good for you in getting your financial house in order through what were likely difficult times.

[yeoman6987]

54. Extremely accurate post

You will here some that say paying back debt is unfair, but deep down they can't possibly believe that.

[badtoworse]

69. You're right. Paint lenders in a bad enough light and the obligation to repay a loan disappears.

It fails any sort of an objective analysis, but the ones who do that are not arguing on an objective plane.

[Heywood J]

64. More simple solutions:

Homeless? Buy a house.
Poor? Get more money.
Jobless? Find a job.
Got PTSD? Stop having it.

[brentspeak]

66. Falls under the category of other "simple solutions" such as

"Get a job!" and "Don't get sick!"

Where do Einsteins such as yourself emanate from?

[burnsei sensei]

76. and if you do get sick, die quickly.

Debt problem solved or passed on.

[HughBeaumont]

70. Siiiiiiiiiiiiiiiiigh . . . winning hearts and minds just like you know how again . . . .

2014 isn't 1971.

http://rationalwiki.org/wiki/Wishful_thinking

http://rationalwiki.org/wiki/Wanting_it_bad_enough

[Dont call me Shirley]

3. ALEC rats no doubt

[closeupready]

4. There was a recent thread claiming 10% of wage-earners

are currently being garnished in the US. That number is really shocking to me, but maybe I'm naive.

[FBaggins]

32. I doubt that you're naive

More likely that the previous thread was nonsense.

It wouldn't be that high unless you restricted the results to a tight age bracket and included child support payments (the vast majority of wage garnishments) and tax levies.

I'd put the real figure (debt levies of all wage earners) at closer to 2-3 percent. Though it's worth noting that that's up substantially over the last few years.

[closeupready]

36. Just for reference, here's the thread I am referring to:

http://www.democraticunderground.com/10025544084

[FBaggins]

49. That's just about what I expected

It isn't 10% of workers, and it isn't just debt repayment garnishments from banks.

It's 10% of workers in the "prime working ages of 35-44" (which isn't really the prime working ages... but it is the prime divorce and child support ages - see below)

It's primarily for payment of child support - which isn't really the same as a bank taking part of your salary to pay a debt... since federal law requires that states do that for child support. IOW, many of those workers may not even be in debt (apart from the obligation to support their children). I'm sure that we can all agree that this a very different thing than some bank getting a court order to take part of your paycheck for a bad debt.

As is payment of taxes owed.

The "real" figure (the one that's relevant to this thread) is slightly higher than my 2-3% estimate... but not by much.

[pipoman]

6. It's not exactly that simple...

This requires a court order, that requires an unpaid civil judgement, that requires a law suit....by the time anyone is garnished on a consumer debt a lot of steps have to occur.

[Travis_0004]

8. And a lot of people dont show up to court to contest the debt

If you dont show up, expect a default judgement.

[hobbit709]

12. one stunt the collection agencies do is not properly notify you of a court date.

[pipoman]

43. A return of service has to be filed with the court

Not something easily lied about...it probably happens, not often, most consumer credit companies hire local collection lawyers to do their legal work. Local lawyers can't remain local lawyers if they earn a reputation for successfully challenged paper services.

[sendero]

26. Exactly.

.... the vast majority of these cases involve debtors that didn't show up for the hearing. No doubt the lenders do whatever they can to discourage attendance, but it is guaranteed, if you are summoned and don't appear, the lender is going to get a default judgment which means the worst possible terms for you.

[bobclark86]

39. Yeah, because I totally...

had time to go to Delaware (where the company was incorporated, hence the case was there ... and five states away) when I was working part time and my student loans defaulted.

Oh, wait. I never got a notice or summons. It just happened.

[Travis_0004]

40. that is a violation of the FDCPA

They are required to sue you where you signed the contract or where you live.

You can easily get that thrown out if they did sue you in Delaware

[pipoman]

45. Not an option for them, and a lot of people

Successfully challenge paper services. Service returns are public records and are part of your court case. You can view the return and challenge it if you truly didn't receive service.

[Dreamer Tatum]

82. coughcoughbullshitcoughcough nt

[pipoman]

41. Yep

[hobbit709]

10. One good thing about TX

The only thing they can garnish your wages for here is unpaid taxes, unpaid child support and unpaid student loans.

[Purveyor]

19. Texas also has very good personal bankruptcy exemptions, i.e. your house regardless of value. eom

[tammywammy]

22. People are encouraged to have child support garnished.

Doesn't mean you're behind, just the regular payment going straight to the state for disbursement. Very common.

[FBaggins]

50. "Encouraged" meaning "required by law" since 1994.

That's automatic for post-'94 orders (unless the ex chooses not to file the paperwork), and almost automatic if you miss payments and your ex requests it from the court.

[Freddie]

56. Same thing here in PA

Court-ordered child/spousal support, taxes, student loans. That's it. Should be the standard nationwide.

[Wellstone ruled]

11. Wow!!!

Love the holier than thou attitude toward this topic. If you have every had your job disappear in the middle of the night and unable to collect your pay,then you would know. Most people who get hit with these garnishments of times don't see them coming. People move from town to town in order to find work. Generally these bills are for some goods of service that was forgotten and here comes a collector with a ton of add on expenses. Seen top notch people go out the door in these type of situations. Next thing it's B.K.time. Working folks aren't stupid and they are very responsible for their debts. Usual cause is forgotten bill or a catastrophic illness or injury or a divorce. Small claims courts are the bill collectors best friend.

[leftstreet]

13. It's mostly fear

The holier-than-thous on DU are pretty transparent. What appears as a hateful attitude towards the unfortunate is usually gut wrenching fear it might happen to them

[AZ Progressive]

15. People who fear should be helpful, not hostile, to others being affected

Otherwise we will have a dog eat dog, every person to themselves, society that hurts everyone.

[closeupready]

17. Either that, or they work in collections themselves.

[BlindTiresias]

42. Or they are just sadists.

[yeoman6987]

55. Don't forget bombs in the Middle East

And climate change. We want to ensure we got it all.

[Xolodno]

23. Which will no doubt lead them to...

...default even more.

Under Fed law you can't get fired for one garnishment....but two..you can.

So if someone else butt's into the 25% they are taking....say hello to unemployment. But at least they can't garnish that.

Bad news, some states will allow an employer to use credit to determine employment.

If they garnish...they really are just being vampires. Sucking everything they can get out of you before they write the rest off as a tax write off.

Bankruptcy would take care of this....except, lets say you manage to own a property out right (that is, you are asset rich...but cash poor)....so bankruptcy is out of the question. That also may be their strategy, see if they can force you to sell while they attach a lien on the property.

[mb999]

38. Repeal the 2005 bankruptcy reform

Bankruptcy needs to be more accessible to individuals just like it is for corporations.

[Brigid]

46. There's a word for this:

Loan sharking.

[gollygee]

48. It reminds me

of working for a company and then ending up in debt at the company store and having the company take your wages to pay off the debt, except in this case the debt can be anywhere and the government is strongly on the company's side and helps the company collect.

[Terra Alta]

47. except in the case of unpaid child support, wage garnishment should be illegal. nt

[HeiressofBickworth]

58. Many years ago (1970's) I was a Bankruptcy Paralegal

I worked for a closed-panel law firm which only took clients at lower fees from certain unions as part of their union benefits. The way it was financially viable was that they used four paralegals (lower salaries than lawyers) for most of the routine work and had only two attorneys for court appearances. One paralegal did DUI/occupational license hearings, one did estate planning, one did probates, and I did bankruptcies, divorces and adoptions.

I had a number of clients who came in outraged that their pay had been garnished. After careful questioning about whether they received dunning letters from the creditor, dunning letters from the collections agency, service of process, where were the papers they were handed, was there a court date on the papers, did you go to the hearing, they usually replied that they just tossed them. Garnishment, as one other poster said, is not the first sign of a problem. There were many opportunities to try to work something out (credit counseling service, leniency for loss of job, major illness in the family, etc) but they did not take the opportunity. And then they were garnished. By that time, bankruptcy was an option.

There are legitimate reasons for failure to pay a debt but ignoring it, hoping they will just go away, is not a smart choice. Creditors and their attorneys can be difficult enough in the best of circumstances; no sense in making it worse.

[kcr]

73. Yes, indeed. Ignoring a problem and hoping it will just go away is not a smart choice.

So why is pretending things are exactly as they've always been the smart choice? Do you think nothing has changed since the 1970's?

[davidn3600]

60. Most lenders don't go to this extent

First off, it would be very costly to do this to every person that defaults. So it depends on the case.

Usually a lender will attempt to settle the debt. That way they make a deal to get some of their money back. This is done with credit card defaults quite often. One advantage to the debtor is that a settlement doesn't ding the credit report as bad as a full write off, collection, or judgement. An advantage for the bank is they dont have to spend a bunch of legal and collection resources.

If the debt isn't very large, they may just write it off. It becomes an analysis of whether it's worth it to pursue. If collateral was put up (ie: mortgage, car loan), most banks don't go much further than taking back collateral unless you have other assets or they think you are socking a bunch of money away.

Lenders may try to file lawsuits against you to see how hard you are willing to fight. I've seen people get sued and the minute a lawyer writes a letter in response the suit gets dropped. (the bank was hoping for a summary judgement or that you would get scared and contact them to make a settlement.) There are all sorts of tricks here.

When it gets to wage garnishments, usually the lender has made multiple attempts to settle a debt or made multiple attempts to contact the debtor. Going that far takes a lot of resources and effort. And it takes a long time.

The statue of limitations also comes into play. For most states, a bank can only pursue a loan for 5 years after the date of last activity (ie: payment from you). After that they may still try to collect, but they legally cannot. In the industry this is termed as "zombie debt."

In the end, you may be able to declare bankruptcy. If you have a debt and are being pursued, don't just ignore it. Talk to an attorney that deals with such lawsuits or a bankruptcy lawyer. The banks know the laws better than you do. You likely need legal assistance when it gets to that juncture.

[RebelOne]

78. I had my wages garnished once.

I had gotten in hot water because of credit cards. The garishment was paid back. But then another lender put a judgment on me and threatened to garish my pay. But I finally got fed up and declared a Chapter 11 bankruptcy. It took me a while, but I am finally free and clear of debt. I only have one credit card and only use it for extreme emergencies.

[Wella]

86. Are there certain companies that are more likely to garnish than others?

I confess to not knowing a lot about this issue.

[niyad]

87. a belated k and r