Judson E. Crump, PC

What is Garnishment? Part 2 of “Dealing with Default Judgments” – Alabama Collection Defense Lawyer Judson E. Crump

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What is a garnishment?

Let’s start with the judgment – because for everything except student loans and taxes, no* garnishment can happen without first obtaining a judgment.  At least, not in Alabama.  If you get sued and lose, or don’t bother to answer, then the person who sues you gets a judgment against you.  What is a judgment?  It is a piece of paper saying that Mr. X owes Mr. Y $####.  But it doesn’t magically teleport money from your bank account to Capital One.  It has to be enforced against something that you have.  If you own real property, they can place a lien on that property.  If you have money in a bank account, they can garnish the bank account.  If you own a vehicle, they can request that the sheriff take it and sell it and give the money to your creditors (this is called a “levy”).  If you have a job, then they can take some of your paycheck each month.  This is a garnishment.

Garnishment is the process of intercepting money that is owed to a judgment debtor by a third party.  For instance, a bank account is a debt owed by your bank to you.  You deposit money at Regions Bank, and pursuant to their depository account agreement with you, they are obliged to pay you back upon request.  A bank account garnishment intercepts the money the bank owes you and takes it to pay to the creditor.

A wage garnishment intercepts the money that your employer owes you and takes it to pay the creditor.  There are limits to what can be garnished.  They cannot take more than 25% of your paycheck, and if you make minimum wage or something close to that, they cannot take more than 30 hours of minimum wage per week – nowadays about $217/week.  What a relief.

Some streams of income are utterly exempt from garnishment: Social Security & VA benefits, child support, most public pensions.  And these funds should always be kept in an account separate from that of your other income – If you mix exempt money with nonexempt money, your creditors can take it all.

Furthermore, the Alabama Constitution provides a special protection for any regular paycheck under $1,000.

Exemption rights other than the 25% limit do not enforce themselves.  You have to claim them.  You do this by filing a declaration and claim of exemption with the court.  You can find a form for it here: http://eforms.alacourt.gov/Do%20It%20Yourself%20Forms/Declaration%20and%20Claim%20of%20Exemption%20for%20Wages.pdf

 

How do you avoid a garnishment?

Undoubtedly, the best way to avoid a garnishment is to not let it get there in the first place.  This means that you should fight them for every dollar.  Like I said, they can’t get a garnishment until they first get a judgment.  They can’t get a judgment without filing the lawsuit and serving it on you personally, your agent, or at your home address.  So if you receive a lawsuit, YOU MUST ANSWER THE COMPLAINT.

You may be able to answer the complaint yourself, but you should not go to trial without a lawyer.  In fact, that’s a straight-up bad idea.  Collection defense is not that expensive.

Some people are afraid to fight, thinking that if you fight them and lose, they’ll add attorneys fees to what you already owe.  NEWS FLASH: they’re charging you their attorney’s fees anyway!  And you have a better chance of winning than you think.

And if you’re just a frightened, risk-averse person who is deathly afraid of a trial, then you can always negotiate after you’ve sued.  If you have a good collection defense lawyer on your side, your chances of getting away with a good deal are better than they were before you got sued.  It’s only after they’ve gotten a judgment that you’ve lost much of your bargaining power.

So if you really want to be proactive about protecting your wages, you will fight your creditors and collectors from the start.  Call me at 251.272.9148 if you want to talk about beating your creditors in court.

Continue to Part III: Responding to Garnishments After the Fact.

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Page 1: The Shock of Garnishment <<< Page 2 >>> Page 3: Responding to Garnishments

*There are some occasions where it may be possible to garnish a debt or bank account pre-judgment, but it is something I have NEVER seen actually done.  Like some of those laws that exist on the books but nobody ever enforces.

The Shock of Garnishment: Part 1 of “Dealing with Default Judgments” – Alabama Collection Defense Attorney Judson E. Crump

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It’s Friday.  You get off work at a way earlier-than-it-feels like 4:27 PM.  And thank God.  Really.  TGIF means much, much more to you than it does to those 20-year olds without kids or real responsibilities, those who, when they say “TGIF,” mean “Yay, I can now go out drinking with my girlfriends!”  Friday for you is payday.

And though something like 90% of your paycheck has already been promised to other people who have provided you the goods and services you and your little ones required to survive the preceding 13 days, it is still a relief to be able to actually pay those people off, and thereby guarantee their continued willingness to deal with you for the next 13 days.  So as you’re thinking about how to spend the next 30 minutes in a manner that will avoid the most late fees and overdraft charges, and trying also to remember the exact amount of the phone bill so that you don’t get a late fee, and also don’t overpay them by too much, your eyes drop down to look at the check stub you got from Payroll.  Even though you know that this check will be for the exact same $826 you’ve been bringing home biweekly since you first had to go back to work after your second child was born, you still have to look down and see the actual check.

Every human does this.  Even blind people.  You can’t not do it.  It is so satisfying to see the money you’ve been paid.  That reward for spending the greater portion of your very limited-in-number conscious hours doing the bidding of someone else, someone (or something, if your employer is a corporation) whose interests may very well be quite different from your own.  It is not so much satisfying (though we talk and hear about the satisfaction of a hard day’s work, but in reality that sort of thing is just a linguistic holdover from the days when most of us were farmers and farmers’ wives, and the length and hardness of each day’s work bore an almost 100% directly proportional relationship to the reward of the work – back then, literally the “fruits of your labors.”) as it is relieving.

Because deep down you know that God did not place you – the sole and utterly unique version of you in the entire universe and its entire history – here on this specific place, on this specific speck in the universe, at this specific point in time, because he thought the world needed this particular unprecedented and unrepeated specimen of humanity to sit at a desk answering phone calls from 8:30 AM to 4:30 PM.

And because you know that those hours you spend slaving (quite literally, slaving, as in completely subordinating your own will to that of another) away for someone else are not your true calling and purpose, but really just a necessary compromise with the unfortunate fact that your presence in this universe requires a large amount of physical resources, resources you cannot produce on your own and therefore must somehow earn by subordinating yourself for large portions of your life to others, because you know this deep down, you must know that your daily sacrifice of self is at least getting you somewhere, right?

So you look down to confirm that this week, you’re getting the same $826 as you did 2 weeks ago, and then your eyes appear to be mistaken, but no, on second glance, they’re not mistaken, and what the fuck?  $619.50?  $206.50 to a “garnishment!”  A GARNISHMENT?  WHAT!  THE!  FUCK!

Yeah.  You’ve been garnished.  Out of nowhere.  Somebody swooped in between you and your paycheck and took a chunk.  Like a seagull with a pogey.

So then to your mind comes the #1 Question asked of lawyers everwhere:  Can they do that?

Continue to Part 2: What is Garnishment?  How do you get one?

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>>> Next Page 2: What is a Garnishment?

Cavalry SPV I, LLC collection lawsuit dismissed – Alabama Collection Defense Lawyer Judson E Crump

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One of my clients was sued by Cavalry SPV I, LLC for a Capital One Best Buy credit card.  They claimed that he owed about $5,000 and that they were the assignees of the debt.  That means that Capital One/Best Buy gave up on trying to collect from him directly, and sold the account to Cavalry SPV I, LLC.  Cavalry is a debt buyer, which means that their entire business revolves around purchasing old charged off accounts from creditors who either cannot or will not (because they don’t want their name associated with the negative PR) take legal action on their own.

"Mr. T" was sued for a Capital One / Best Buy credit card that was allegedly assigned to Cavalry. We convinced the collectors to dismiss the suit rather than go to trial.
“Mr. T” was sued for a Capital One / Best Buy credit card that was allegedly assigned to Cavalry. We convinced the collectors to dismiss the suit rather than go to trial.

I entered the case after my client had answered pro se and received a trial date notice.  I contacted the opposing counsel about their evidence and we agreed to have the case dismissed with prejudice.  This means that the debt, if it ever existed, is gone forever.  My client can send that court order to the credit bureaus and demand that they remove the account from his credit report.

Cavalry SPV I, LLC Collection Lawsuit Defeated- Alabama Collection Defense Attorney Judson E Crump

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Our client was sued twice by Cavalry SPV I, LLC for $2598.80 on a credit card he once had with HSBC.  The card had, allegedly, been transferred to Capital One Bank, N.A. at some point, and then to Cavalry SPV I, LLC.  Cavalry SPV I, LLC then sued my client.  He answered the complaint pro se (after having read my book) and then hired me to come to trial for him.  I notified the collection attorneys of my appearance in the case and requested copies of their evidence.  We were able to convince the judge to exclude their evidence from the record and rule in our favor.

Our client was sued by Cavalry SPV I, LLC for an HSBC credit card. We won.
Our client was sued by Cavalry SPV I, LLC for an HSBC credit card. We won.

 

The case was heard in the District Court of Mobile County, Alabama.  The debt, if it ever existed, must now be permanently removed from my client’s credit reports.  Another victory for Alabama working folks!

Who is Ferry & Nicholas? Why you should not hire them. – Alabama Consumer Credit Attorney Judson E Crump

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If you have received a letter from a “firm” called “Ferry & Nicholas,” it means that you have been sued by a credit card company or debt collector.  Ferry & Nicholas runs a clever little scheme.  See, they’re not lawyers, which means that they don’t have to comply with the Alabama Rules of Professional Conduct.  Why does this matter?  Because the Alabama Rules of Professional Conduct forbid lawyers from sending people letters until 7 days have passed since you were served with the lawsuit.

Now, I know full well that most bankruptcy lawyers don’t bother to comply with this rule – they just print the list of lawsuits from the court in their county and have their secretaries blast letters to every lawsuit debtor.  And these letters tell you how great and easy and cheap and perfect-for-every-situation bankruptcy is, and that if you don’t file bankruptcy, you’re pretty much doomed to a life of decrepitude.  Of course, that’s total bullshit, but that’s another issue for another day.

Ferry & Nicholas is a company that preys on people who don't know the legal system. You can hire a real lawyer to get you a better deal for less money.
Ferry & Nicholas is a company that preys on people who don’t know the legal system. You can hire a real lawyer to get you a better deal for less money.

Ferry & Nicholas, however, doesn’t even have to pretend to comply.  So all of these people — who have no idea they’ve even been sued, and that they’re about to enter a precarious situation where it is very important to protect their legal rights, and who really need access to real legal advice about their situation — these people get introduced to the legal debt collection system by someone who is utterly unqualified to represent debtors and their interests.

Now, some may say “what’s the harm?”  At least you’re getting an advance warning that the lawsuit is coming, right?  Well, to the extent that some debtors are sophisticated people who understand how the court system works and know the risks of hiring a debt settlement factory to do a lawyer’s job, yes, there is no harm.  But unfortunately, most people don’t know the legal system.  And most people don’t know that Ferry & Nicholas cannot do a thing to stop Midland Funding or Portfolio Recovery Associates or LVNV Funding or whoever it is from taking a judgment against you.

So they don’t know that when they hire Ferry & Nicholas, the clock is still ticking on the deadline to answer the lawsuit.  And in District or Small Claims Court, that deadline is only 14 days.  In Circuit Court, the deadline is 30 days.  And what happens if the deadline passes while Ferry & Nicholas is negotiating, or, as they call it, “mediating” your debt?

A default is entered against you.  Which means that you’ve lost your lawsuit, which means that the creditor has utterly no motivation to settle with you.  By contrast, you could spend the same amount of money hiring a real attorney, and either settle for a deep discount or beat the lawsuit completely.

I had a client who hired Ferry & Nicholas and they “successfully” settles a collection case for her.  But unfortunately, Ferry & Nicholas didn’t do anything to make sure the collector stuck to the deal.  And here’s the craziest part: they didn’t even get the deal in writing!  Their ‘mediation’ was a telephone call they made with the collection lawyer – and the deal they struck?  A 0% discount!  They agreed to a judgment of the FULL AMOUNT OF THE LAWSUIT.  YOU CAN DO BETTER THAN THAT WITHOUT HIRING ANYONE.  With a decent lawyer, you can do wayyy better than that.

So if you get a letter from Ferry & Nicholas, throw it in the trash and get some real help.

Can you stop a foreclosure in Alabama without filing bankruptcy? – Alabama Consumer Credit Attorney Judson E Crump

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Rarely.

I realize that there are a number of “law firms” from other states that claim to be able to stop or delay foreclosures without filing bankruptcy.  They are all scams.

If you never listen to another word from a foreclosure lawyer, listen to this one: there are three ways to stop a foreclosure without convincing the bank to do it on their own -Paying Up, Bankruptcy, and a Temporary Restraining Order.

TROs are pretty tough to get.  You have to basically come up with evidence that the foreclosure is clearly wrongful, that the homeowner will be severely and irreparably harmed, and that.  Which is not always the case.  Now, a foreclosure can be illegal even if the borrower is behind on payments, but asking a court for a TRO requires some pretty heavy lawyering and I don’t know any lawyers who will do it without being paid up front.  See, even if you have a good case against the foreclosing bank, letting the foreclosure happen doesn’t destroy the case.  Sometimes, it is actually better to do that, because the bank will then try to eject you from the property in a state court lawsuit and you can bring up their illegal conduct as a counterclaim.

Paying up is pretty simple: you can either pay off the entire loan (which you can do after the foreclosure anyway through your 1 year right of redemption), or you can exercise your right to cure, in which case you pay back the amount of money you are behind and the mortgage gets reinstated.  The right to cure in Alabama is absolute and can be exercised at any point up to 5 days before the foreclosure sale.  Furthermore, they have to provide you with notice of the amount required to cure the default so you know what it will take to fix it.  If you send them that amount, they have to call off the foreclosure.

And finally, there is Chapter 13 bankruptcy, which is what most people who want to stop a foreclosure end up doing.  There are two reasons for this: 1) there are a million bankruptcy lawyers who flood the TV, radio, and yellow pages with advertisements announcing their ability to “STOP FORECLOSURE, REPOSSESSION, WAGE GARNISHMENTS” and 2) Chapter 13 is a simple, guaranteed remedy.  If you can catch up the mortgage arrears over 5 years and keep making the regular payments, then you keep your home.  It’s that simple.  This is a great remedy – unless you’ve been dealt with illegally, in which case you may have rights against your lender that give you a better result than filing bankruptcy.

Can my doctor refuse to see me because I didn’t pay a bill that was discharged in bankruptcy? – Alabama Consumer Credit Attorney Judson E Crump

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Yes, unless it is an emergency.  Nobody can force you to do business with someone you don’t want to do business with, unless you’re trying to discriminate against a protected class.  Debtors are not a protected class.  So yes, doctors can refuse to see you for routine or pre-planned services if you have not paid them.  Likewise, dentists and veterinarians can hold your puppies and gums hostage to their demands for money.

The big exception to this rule is for medical emergencies.  If you’re shot and rushed to an ER at a hospital that you owe money to, they have to treat you.  This is why so many poor people go to the ER.  They don’t have health insurance or money to pay a normal doctor, so when they get sick, they just wait until it gets bad enough and becomes an emergency and then they go to the ER.

There is another, smaller exception: they cannot withhold your medical records for nonpayment of bills.  They can charge you a small fee for printing copies of your records, but that’s all they can charge you.  So here’s an example:

Susannah is a cancer survivor, but her insurance hit a lifetime maximum in 2011, and she had to file bankruptcy in 2012 because her medical bills were over $200,000.  She still owes Greedy Oncology, PC $2,000, and she needs to see another oncologist for a follow up appointment.  She found someone who will see her, but she needs the records from Greedy Oncology.  The regular fee for her records is $15.  When Susannah asks for her records, they can charge her $15 to provide the records, but they cannot charge her $2015, or anything beyond $15.

$19,000 Default Judgment Vacated – Alabama Collection Defense Attorney Judson E. Crump

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If you are not served with the Summons and Complaint in a collection lawsuit, then a default judgment entered against you in that lawsuit is void.  That was the point I made to the Mobile County Circuit Court at a hearing on my Motion for Relief from a default judgment on July 11th.  My client had apparently been sued by Credit Acceptance Corp. back in 2010.  They were unable to serve process (meaning deliver a copy of the lawsuit papers) upon her directly, so they sent a copy by certified mail to the address they had on file for her.  The U.S. Postal Service delivered it and someone signed for delivery.

The collection attorneys filed a copy of the signed return receipt with the court and moved for a default judgment.  It was granted without opposition.  There was one problem, though: my client didn’t live at that address.  She had lived there briefly back in 2006, but had long since moved away.  So the person who signed for it was not capable of receiving service for her.

It is possible to "undo" a default judgment after it has been entered, but only if you can show that you never had a chance to see the Complaint.
It is possible to “undo” a default judgment after it has been entered, but only if you can show that you never had a chance to see the Complaint.

She didn’t even know about the judgment until one day out of the blue, her paycheck was missing some of its dollars.  She found out that she’d been garnished on a judgment she never knew existed.  So she came to me for help.  I filed a motion for relief from the judgment.  It was granted and now my client will have her chance to defend herself from this suit.

Normally, default judgments are permanent.  They are only reversed in specific circumstances, and if the complaint was received by an adult at your address, or someone who is your agent (like a spouse), you’re stuck with it.  But when you can show that you’ve never been served with the complaint in the first place, your constitutional right to due process of law provides that you can reverse the default judgment and get your day in court.

How to assume a mortgage when the property owner dies (or divorces) – Alabama Consumer Credit Attorney Judson E Crump

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When a property encumbered by a mortgage is transferred, most mortgages have a due-on-sale provision that requires you to pay off the entire loan.  This means that even if have the desire and ability to take over the mortgage payments, the bank can prevent you from doing that.  So you have to either a) let the home go, or b) find someone to refinance it for you. For some people, refinancing isn’t a problem.  But for a lot of folks, it is, especially if a rough economy has harmed your credit rating.  And even if you do qualify for a refi, you’ll still be required to spend thousands of dollars to do so.

Fortunately, if the transfer is to a relative due to a divorce or death, the law provides an escape from the due-on-sale clause: the Garn-St. Germain Act.

Garn was passed in 1982 to help the banks make more money.  See, back then, interest rates were high and getting higher.  A lot of people who bought houses wanted to keep the existing mortgage on the property because a new mortgage would have a higher APR.  And a lot of people who sold houses that had low-interest loans wanted to be able to sell the low-interest rate along with the property – because it improved the marketability of the properties.  But the banks were obviously unhappy about all of these borrowers who weren’t being forced to refinance new loans, so they started inserting due-on-sale clauses into their contracts.  But then a few state courts around the country saw what was happening and said, “No, that’s not fair, you made a 20 year loan with an 8% APR, you’re stuck with a 20 year loan with an 8% APR.”

This made the banks even more unhappy, so they had to pull out their trump card: Congress.  After taking a lot of steak dinners and campaign contributions, they passed the Garn-St. Germain Depository Institutions Act of 1982.  It prohibited states from stopping due-on-sale clauses.  Suddenly, thousands of home buyers were forced to go to banks for new loans every time a home purchase happened.

Thankfully, a few guys in the Hill were concerned enough about ordinary people to insert some exceptions to the new rule: if someone receives a property due to death, divorce, or other family-style transfer, then they don’t have to deal with a due-on-sale provision.

So if you want to assume a mortgage on a property you’re receiving through devise or divorce, you need to write the mortgage company a letter explaining what you’re trying to do.  Send it to their correspondence address that they put on the latest statement.  You can see a sample letter here:

Garn St Germain Act Notice – Divorce

Does Filing Bankruptcy Cut off your Power and water? – Alabama Consumer Credit Attorney Judson E Crump

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No.  The filing of a bankruptcy does not allow utilities to cut off their services.  Nor does it allow you to keep using those utilities without paying for them.  In most situations, the filing of a bankruptcy has no effect on your utility bills.  You keep using the services, you keep paying the bills, and everyone is happy.

However, there are a few situations where a bankruptcy does impact your utilities.  The first is where you have old bills for services you don’t use anymore.  Most commonly, this involves cell phone bills that you still owe after switching to another carrier.  These are unsecured debts that are typically discharged in bankruptcy.

If you are behind on power and water bills, you can discharge them in the bankruptcy, but if you ever want to use the services of that particular utility again, you’ll have to pay them back what you owe.  In Alabama, for instance, most places are subject to the monopoly of Alabama Power Co., and unless you’re moving to a different state or a local power co-op, then you’re stuck paying Alabama Power off.  The same goes for water bills, but they’re usually easier to escape because they’re more local.

What about situations where you owe Alabama Power for both electric service and a washer/dryer you financed through Alabama Power and they bill you for each month with your power bill?  The bill for the washer/dryer is a separate debt, and should be treated as such.  This means that you can either surrender the washer/dryer and discharge the debt, or you can keep the washer/dryer and keep paying the debt.

Here’s a common example: Debtor owes Comcast $400 for past cable bills, $800 to Verizon for a phone that has been disconnected since 2011, and $600 to Alabama Power for past due bills.

The Verizon bill will be discharged, because the debtor no longer uses that service and has no reason to keep paying it.

Comcast must be paid to keep getting cable, but Debtor can switch to satellite or public TV and save that $400.

Alabama Power must be paid because Debtor still lives in an area where they’re the only provider of electricity.

To sum up: you have the right to discharge all of it, but you only want to exercise that right if you don’t need their services anymore.

"Licensed in Alabama and Texas. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code. No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers. The use of this website DOES NOT establish an attorney-client relationship between Judson E. Crump, PC and you."