Debt collectors have never had much of a positive reputation in terms of customer service.
However, a recent report by the National Consumer Law Center indicates that their impact goes behind the frustration and stress they heap on those who owe them. In an overwhelming number of cases, debt collectors are securing civil court judgments against debtors, then proceeding to garner wages and seize assets to a degree that it is driving people into poverty.
Our Louisville bankruptcy lawyers understand the situation is especially dire in Kentucky. In fact, Kentucky was among just four states given an overall “F” rating when it came to state oversight and enforcement of financial protections for families in debt. Others included Delaware, Michigan and Alabama.
To understand exactly what this means, you first need to know that every state has specific exemptions when it comes to the protection of wages and property, regardless of what you owe and to whom. The idea of these legal protections is to prevent individuals and families from being driven to destitution just because they have fallen into debt.
Ideally, the NCLC said that these exemptions would accomplish all of the following:
- Prevention of garnishment of wages beyond a point that would push a debtor below a living wage;
- Allowing the person in debt to keep a used vehicle of average value;
- Preservation of a medium-value family home;
- Protection of necessary household goods;
- Shielding of at least $1,200 in the debtor’s bank account, such as to allow the coverage of minimum funds required to cover basic expenses such as rent, groceries and utilities.
Unfortunately, there is not a single state in the country in which the exemption laws meet all of these requirements. Federal laws do provide some bare bones protections. For example, U.S. law will shield about $220 weekly from your paycheck. That would put a single person at below the federal poverty level. For a family of four, that would be less than half the federal poverty guideline.
Of course, bankruptcy provides certain exemptions as well. However, for those who don’t file for bankruptcy, it is primarily up to the states to help debtors hang on to their property if there are civil judgments against them.
As we mentioned earlier, Kentucky is far worse than most.
Most civil judgments pertaining to debt are won by default. The debtor never even makes an attempt to fight the debt collector in court. Too many people assume they have no recourse or ignore the notices to appear in court. Judges are more inclined to find a case in favor of the plaintiff if you never bother to even show up for court. Many of these cases can be significantly minimized by hiring an attorney. Even if you don’t win, you may be able to successfully argue for a reduced final judgment.
However, once a judgment is secured against you, there is little choice but to pay – or file for a Chapter 7 bankruptcy and have the debt liquidated.
To give you an idea of what your financial landscape would look like if you faced a substantial civil judgment in Kentucky, consider the state’s rating in each of these categories:
- Kentucky received an “F” with regard to wage protections, allowing only for the protection of the federal minimum, which allows up to 75 percent of your wages garnished, not to exceed 30 times the federal minimum wage (or about $220, as we mentioned earlier).
- Kentucky received an “D” with regard to protection of family car, exempting cars valued at a maximum of $2,500.
- Kentucky received an “F” with regard to protection of the family home, offering a home value protection of just $5,000.
- Kentucky received a “D” with regard to protection of household goods, shielding just $3,000 in total household property.
- Kentucky received an “F” with regard to protection of bank accounts, offering no exemption at all that can be applied to bank accounts.
If this is the situation in which you have found yourself, we can help.
If you need to speak to a Kentucky bankruptcy attorney or Louisville foreclosure defense firm, contact the Schwartz Bankruptcy Law Center at 866-270-4495 for a free and confidential consultation to discuss your rights.
No Fresh Start: How States Let Debt Collectors Push Families Into Poverty, October 2013, National Consumer Law Center
More Blog Entries:
Louisville Bankruptcy: Debunking the Many Myths, Oct. 9, 2013, Louisville Bankruptcy Lawyer Blog