No, this sort of garnishment is not found on a fancy Christmas dinner plate. This is a legal mechanism by which creditors can get the money you owe them without your consent. Once a creditor has obtained a judgment against you in a court of law (and there are some government creditors that do not have to go through the court process, but still have to issue notice), they can obtain a garnishment order that you will not be aware of until it hits.
Garnishments typically take two forms. The one most people are aware of is a wage garnishment. This is an order issued to the debtor’s employer to withhold up to a certain percentage of the pay. This can actually be a huge hit, but it is only the “one” punch that leaves your head spinning. The “two” knockout punch that often surprises people is a bank account garnishment. So, if your paycheck is direct deposited into an account, the creditor can scoop the rest of your income right out of the bank leaving you with no means to pay electricity, rent or a house payment.
While a wage garnishment is an ongoing order that allows for up to a certain percentage to be seized each month, the bank account is a one time hit, yet it takes all. However, the creditor can issue new bank account garnishments so as to hit the accounts repeatedly over time getting whatever happens to be in there at that moment.
The only defense once this barrage of punches starts flying is to file bankruptcy. If an individual creditor seizes more than $600.00 through these garnishments in the 90 days immediately preceding filing, then there is a chance of recovering them. So, it is important to take action and seek the counsel of a bankruptcy attorney before you are down for the count.
Well, no one does. That is a given. However, there are a few things to remain aware of if bankruptcy is something you have been contemplating here recently:
1) Any gifts you receive of substantial value at Christmas are going to have to be listed in your bankruptcy on Schedule B and exempted on Schedule C. You will need to individually identify any particular item you received that is worth hundreds of dollars.
2) Any expensive item you purchase, whether keeping it in house or giving it away to someone else, will have to be reported as well. If it is a luxury item, that is something costing more than $650.00, you will be raising red flags and risk losing the discharge of that debt.
3) Your right to receive a tax refund arises on December 31st of each year if you overpaid your income taxes. This is true whether you file a tax return right away or wait until the last minute. That tax refund is an asset of the bankruptcy estate upon filing your petition and must be listed on Schedule B and exempted on Schedule C even if you do not know the exact amount you will be receiving.
If you own a home and have a large amount of equity in that property (equity meaning value minus secured debt), you may have a very limited amount of exemption to put towards these assets mentioned above. Consulting with a bankruptcy attorney prior to Christmas may be a wise gift to yourself.
First, I want to give a shout-out to my law school compatriot and all ’round helpful attorney, Ben Carter, for his pointers in the consumer protection arena. I recently was approached by a young lady for help with a particular debt. Other than this one liability, she had no debt to speak of and so bankruptcy really would not be the most cost-effective way of dealing with the issue. Bankruptcy will definitely extinguish a debt that arose out of bad practices by the creditor, so if the particular debt is high enough or if there are several issues that could be wrapped up at one time, then bankruptcy would be a route to consider. But when the only issue is a liability that came about by unlawful practices of the creditor, then one can consider another line of attack – pursuing an action under the Kentucky Consumer Protection Act (KCPA).
In my client’s situation, she was approached by a home security company. I do not want to go into the details at the moment because this matter is still pending, but I will say the salesperson for the home security company engaged in some bait-and-switch tactics and made some representations that she relied upon that turned out to be false. She quickly decided to cancel the contract but, as a result of one of those misrepresentations and deceptive acts, she missed the window in which the company (actually it turned out there were two separate companies which made it even harder to know what was what) claimed they would have honored the cancellation. Further, they claimed the damages for stopping the contract were the exact same amount as it would cost for the home monitoring service over three years. I did some research online via the Google (if I call it “the Google” it just sounds more impressive don’t you think?). Apparently complaints of this nature against these two cohort companies is quite widespread.
Now, the really nice thing about pursuing a company for a violation of the KCPA is where suit can be brought. The ordinary rule of procedure in a civil lawsuit is that the suit must be brought where the defendant is located. However, if a person buys stuff or services mainly for personal use, and is subjected to “unfair, false or deceptive acts or practices” (KRS Sect. 367.170) then they can bring suit in their own county’s Circuit Court (KRS Sect 367.220). This is incredibly helpful when, as in this young lady’s situation, both companies are non-Kentucky based businesses. If she had to sue them on their home turf, the cost would be astronomical.
That same statute, KRS 367.220, goes on to make sure judges know that they can award attorney fees to the consumer if they prevail and they can even award punitive damages against the offender. However, to position oneself the best way possible to make either of those things happen, the consumer must document extensive efforts to settle the matter along the way.
Given the generous jurisdiction, venue, and damages provisions of the KCPA, one would think more suits would be brought. This is where the economics of fraud come into play. Businesses that engage in fraudulent practices typically do not go after huge amounts of money. I venture to say that, other than that deposed prince of Nigeria, nearly all businesses who are fraudulent seek to acquire well under $2,000.00 from the consumer. That means that someone seeking to redress the wrong through court could end up spending about as much on a lawyer as the debt itself. And, as with all litigation, there is no certainty of prevailing nor of being awarded attorney fees. Attorneys rarely will pursue one of these cases without some assurance that their time will be compensated and so the “cost-benefit analysis” often favors the dishonorable business. And, there is a dearth of low-income or pro bono legal advocacy programs because our society does not wish to fund them.
There is one more avenue a consumer can take if they cannot find a lawyer. Although there is absolutely no guarantee it would right their own personal injury, they can report the matter to the Attorney General’s Office and that office may investigate the businesses practices. Even if they do investigate and pursue an action, they would not be representing you individually. Furthermore, they state several steps to take first on their website.
All this considered makes bankruptcy a more attractive option to get out from under a debt arising from fraudulent or unfair business practices. When bankruptcy does not make sense, though, it is good to know that other avenues are available.
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