The debt collector v. the widow
The Wall Street Journal recently addressed the problems of garnishment in the course of debt collection. I have talked about the problems with the small claims court-debt collector collection, in which small claims courts across the country have turned into a convenient vehicle for debt collectors to get default judgments. The next step is garnishment. The exact procedure will vary from state to state. In Minnesota, the debt collector doesn’t even need to file a lawsuit to start garnishment, due to our “pocket service” laws.
A bank gets a garnishment summons, and locks down funds. Public assistance like Social Security Income is technically exempt from garnishment, but a debtor has to file exemption papers to get their money back. The bank takes the money, and the debtor has to fight to get it back.
That’s how the system works.
It hits seniors particularly hard, since living off a fixed income is difficult enough. When you can’t get any of that money out of the bank for a month or more, it can wreak havoc on a debtor’s golden years. And remember these debts aren’t always valid. Some are legally uncollectable. In other cases, the debt collector has nothing more than a vague piece of paper that may or may not prove the individual owes the debt.
The article also mentions Minnesota debt collector law firm Messerli & Kramer:
A legal-aid lawyer filed repeated exemption claims over nine months with the collector, a law firm in Plymouth, Minn., called Messerli & Kramer P.C. The law firm said on more than one occasion that it hadn’t received the paper work. It denied the exemption.
At a resulting court hearing, a judge, after a three-month delay, agreed Ms. Rice’s funds were exempt and ordered Messerli & Kramer to return $1,472 and pay Ms. Rice $100 for disregarding her claims in bad faith. The law firm did so. But two days later, it filed a garnishment order again — the fifth time it had done so.
“Mrs. Rice said this caused her more stress than having her stroke,” said Kathleen Eveslage, of Southern Minnesota Regional Legal Services. “They basically made her last days hell.” In November 2003, she died.
About a year later, Minnesota’s attorney general sued Messerli & Kramer, alleging that it repeatedly garnishes accounts containing exempt funds and unlawfully denies exemption claims. Messerli & Kramer said it can’t comment during the suit, pending in Dakota County district court. (See Minnesota’s suit [PDF link], and Messerli’s response [PDF link].)
“These people keep garnishing because they know many will just walk away, especially these poor little old ladies, who need their dollars when they get them,” said another target of Messerli & Kramer, Thomas Bender. An 84-year-old disabled veteran of two wars, he uses a walker and a wheelchair, disabilities due partly to a back injury incurred while flying dive-bombing missions in Korea.
For a time, he once collected debts himself, for a credit union. Yet even he didn’t know how to protect his Social Security. After his home-based travel-agent business folded in 2001, the Richfield, Minn., widower fell behind on car payments to Ford Motor Credit Co. He surrendered the car, but the creditor turned the remaining debt over to Messerli & Kramer, which demanded he pay a balance of $5,757.
Mr. Bender offered to work out a repayment plan, but the collector got a default judgment against him and garnished his credit-union account, which contained his Social Security and his Veteran’s benefits.
He sent an exemption claim, attaching a letter from the Social Security Administration. Messerli & Kramer rejected the claim, saying he had “failed to provide sufficient proof that the funds withheld are exempt.”
In an attempt to protect his future checks, Mr. Bender stopped direct deposit. He then had to arrange, a week in advance, to have a bus service for the disabled take him to a bank to cash his check and pay bills. Even though he no longer had the car he’d bought, and although all of his income was exempt from creditors under law, Mr. Bender was determined to pay off the car loan. He filed a bankruptcy petition that enabled him to set up a long repayment schedule, finally paying it off this month.
[...] threw the term “pocket service” out there the other day, and then Ben Popken IM’ed me to ask more about it. Pocket [...]
This was an excellent article - it is unbelievable that banks claim not to be able to discern the source of your money when it suits them and take exempt money to pay themselves all the time. And will not help customers in the least way to protect themselves from illegal garnishment by outside entities. An elderly person has to secure a lawyer to protect money from being taken that’s already legally protected? And how would he or she get an attorney with a garnished bank account? This is a huge problem with the goverment effort to pay only by direct deposit…you have little recourse when things go wrong with your bank.
I agree with Clarity. The poor lose their money because of unpaid debt which is the result of being poor, yet they have to scrounge up some money to hire an attorney to get the money returned that should not have been tapped to begin with. There’s definitely something wrong with that picture.
I am was served a summons for $1000.00 debt from Messerli & Kramer P.A. for a Capital One Small business account. My business closed about two years ago. A few weeks later I received a summons that I was being sued for attorney costs. I did not respond because they threatened if I lost in court it would cost me more money. Today in the mail I received A execution/garnishment excemption notice of intent to levy or garnish earnings. I am going to send them a excemption notice because my family is on medical assistance and I received energy asstance in the past 6 months. My daughters also quailfy for reduced school lunch for 2007 -08 school year. I am living paycheck to paycheck and I can barely make ends meat now. I can prove all of my living expenses in court. I’m concerned that my excemption will be ignored by Messeri & Kramer. I am going to call the Minnesota Attorney’s general office on Monday and report them. I think that this is insane for a $1000 business debt. I
I was just hung up on 4 times when I tried to get information they said they didn’t have time to talk to me and that I need to pay. I am calling the Attorney Generals office as well because they have no right to disrespect someone who is willing to pay the debt if they can prove it is owed. I did contact an attorney and when I told them who I was dealing with they know them all too well. They said don’t give them anything until the paperwork is signed by a judge. What does that tell you.