Study: Millions Have Paychecks Garnished for Old Debts

A study by ADP, the largest payroll provider in the U.S., found that of 13 million employees on file, 1 in every 10 of prime working age (35 to 44) had their paychecks garnished for recovery of past debt. The research was prompted by a journalistic inquiry from ProPublica and NPR, which sought to find out how past debts were affecting people trying to recover from the financial knock-out of the recession.
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One such affected worker described his wage garnishment as, “A roundhouse kick.” Just as he thought he might be turning the corner, his credit card company began automatically deducting twice-monthly payments from his paychecks – one quarter of what he made, which is the maximum allowable by law. The company deducts this whether he can afford it or not. The total bill now stands at $15,000, which is grossly inflated by fees and interests, and had originally started at $7,000.

“It just knocks you down and out,” he was quoted as saying.

Our Miami credit card defense attorneys know many of these individuals end up in this situation after failing to respond to legal notices, warning them debtors plan to take them to court. By not showing up, debtors effectively forfeit their right to dispute the charges or at least negotiate a solution that’s reasonable.

A good share of these debts include child support. There isn’t much that can be done about that, as those terms are negotiated in family court. However, a large percentage of affected workers see their wages docked for consumer debts, primarily medical debts, student loans and credit cards.

Skimming a full 25 percent off the top of workers’ ever-meager earnings (wages have been stagnant or falling for years now) seems deeply unfair. Unfortunately, it’s legal, and unless debtors make a point to fight back, it will continue unabated.

Although creditors have long held this power, the National Consumer Law Center reports they have been exercising it with increasing frequency. The center has urged state and federal government leaders to act quickly to reform laws regarding wage garnishment, because it delivers a serious blow to those impacted.

While the full scope of the issue has been largely unstudied, ADP’s figures (the first time the issue has been explored on a larger scale) suggest wage seizures were most frequent with workers who were lower-income, middle-aged and blue collar. The rate tended to be highest in the Midwest. Statistics were not broken down by race, but if we had to guess, we’d bet black Americans and other minorities are disproportionately affected, too.

In some states, like Missouri, creditors are allowed not only to hustle 25 percent from each paycheck, they can also continue to charge high interests rates even while they are doing so, until the debt is paid off.

It’s worth noting that when these creditors show up in court, their interest are almost always represented by an attorney. Defendants, however, assume they don’t have the resources to afford one, so even if they make a point to show up, they lack legal advice on how to proceed. The report by NPR and ProPublica found in one county in Missouri, just 7 percent of all debtors who were dragged to court by creditors were represented by an attorney. Far more common were default judgments, were debtors didn’t show up at all.

The problem may be, at least partially, a lack of education. Debtors mistakenly believe that because they have the debt, they have no reason to show up and fight it. However, what many don’t understand is that when the facts of the case are not questioned, the judgment will always be skewed heavily in favor of the plaintiff/creditor. Defendants who do hire lawyers, especially in cases where the debt has been purchased by a third party, usually can pursue a determination that will result in the court reducing or sometimes dismissing the debt.

Attorneys for the Association of Credit and Collection Professionals call litigation a “high cost mechanism” for debt collection, saying it’s a last resort when other collection efforts fail. However, the truth of the matter is that because so few debtors dispute these claims, and cases are so frequently decided in their favor, it is almost always advantageous for creditors to pursue these cases. That’s why there are so many of them.

But you do not have to fight these battles alone. We understand you are in precarious financial circumstances, and it’s our goal to help get you back on solid financial footing.

If you’re battling foreclosure or debt in Miami or the surrounding areas contact Bruce Jacobs & Associates for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.

Additional Resources:
Unseen Toll: Wages of Millions Seized to Pay Past Debts, Sept. 15, 2014, By Paul Kiel, ProPublica and Chris Arnold, NPR
More Blog Entries:
Bank of America’s Mortgage Abuses Laid Bare, Sept. 2, 2014, Miami Debt Defense Lawyer Blog