Debtor’s rights are those rights which are guaranteed under debtor laws to individuals who borrow money, known as debtors. These laws apply whether the individual is purchasing a home, a vehicle, or using the funds for personal use.
There are both federal and state laws which protect debtors from unfair treatment by creditors, including the Truth in Lending Act (TILA) and the Fair Credit Billing Act (FCBA). The TILA is a federal law which applies to certain creditors and requires them to provide certain information to consumers, including the amount lended and the applicable percentage rate.
The FCBA provides guidelines for the steps a creditor must take when there is a dispute regarding a credit card bill. It also provides the rights of the consumer when there is an error on their credit card bill.
What are Garnishments?
A garnishment is a legal procedure which permits a creditor to collect funds which a debtor owes by accessing the property of the debtor when that property is in the possession of an individual or entity other than the debtor, such as in a bank account or in the account of an online investment company. A creditor may also collect payments from a debtor’s wages or salary before the employer pays it to the debtor, known as a wage garnishment.
In order to obtain a garnishment, a creditor is required to file a lawsuit in a civil court and win a judgment against the debtor. A garnishment typically occurs following the entry of a judgment when the creditor obtains a court order authorizing the garnishment.
There are certain types of property which cannot be garnished. This includes:
- A portion of the debtor’s work income, at a maximum of 25% of their weekly disposable income. Disposable income is income after taxes and other withholdings are deducted;
- Veteran’s benefits;
- Civil service benefits;
- Federal retirement benefits;
- Social Security benefits;
- Supplemental Security Income (SSI) benefits;
- Worker’s compensation;
- Unemployment benefits unless the garnishment is for the collection of child or spousal support;
- Child support paid to the custodial parent.
A garnishment can be ended in two ways. One way is to pay off the debt in full. The other way is for the debtor to file a Garnishment Exemption Claim Form in the court which issued the judgment. This form is complex and is best completed with this assistance of an attorney who is familiar with wage garnishment laws.
What are Levies and Attachments?
A levy, which is also called an attachment, is the taking and selling of a debtor’s property in order to pay off the debt owed to a creditor. A creditor is only permitted to levy the property of a debtor if there has been a judgment issued against the debtor.
The creditor must then obtain a writ of execution from the court prior to requesting law enforcement to execute the levy or attachment and taking possession of the property. A writ to execution identifies the property which can be taken and sold.
There is certain property which is exempt from a levy. The law protects debtors from having all of their possessions or income taken away, so that they can survive.
The following property is exempt from a levy:
- Up to $5000 in household goods;
- Up to $1000 in clothing;
- Prescription drugs and medical aids;
- Up to $10,000 worth of tools and equipment that is used for work or school purposes; and
- Some amount of equity in the debtor’s home and vehicle as determined by the state.
This is not an exhaustive list of all exemptions. Once law enforcement has seized the property, they will sell it at a public auction and apply the profits from the sale to the outstanding debt. The levy process will be complete when the debt is paid in full.
A debtor may attempt to prevent the sale by filing a claim exemption within the timeframe provided by the state law in which the sale is to take place. If, however, the debtor does not file this objection, the sheriff will put the item up for sale.
If the proceeds from the sale of the property do not pay off the debt, the creditor may continue to pursue the debtor for the remaining balance which is still owed. It is important to note that if a debtor has a secured loan from a creditor which is secured by property, the creditor may take that property without obtaining a writ of execution. For example, if a debtor borrowed money to purchase a vehicle, that vehicle may be security for the loan.
In other words, if the debtor does not pay the car loan on time, the creditor may repossess the vehicle without going to court and obtaining a judgment and writ of execution. If a creditor is attempting to levy an individual’s property, that individual should consult with an attorney who is experienced in levy and attachment law.
What are Collections?
A collections agency typically collects a fee for obtaining payment from debtors. A debtor, however, is protected from being harassed during the collections process by the Fair Debt Collection Practices Act (FDCPA).
The FDCPA prohibits a debt collector from:
- Calling prior to 8:00 a.m. and after 9:00 p.m. in the debtor’s time zone;
- Calling a debtor at work;
- Harassing the debtor;
- Using obscene or abusive language;
- Making false or misleading statements;
- Adding unauthorized charges to the debt;
- Making threats; for example, a debt collector cannot threaten to report the debt to law enforcement or otherwise suggest that the law enforcement can become involved.
What are Repossessions?
A repossession is the taking of property by a creditor when that property was used as security for the loan. In most cases, loan documents will include a provision stating that if the loan payments are not made as required by the contract, the creditor has the right to repossess the property.
For example, if an individual obtains a car loan and does not make their payments on time, the creditor has the right to repossess the vehicle. In many states, there are steps a creditor must take prior to repossessing the property from the debtor.
The creditor must provide the debtor with notice that the loan is overdue and that notice must provide the debtor a time period in which to make a payment and prevent the repossession. In some cases, an individual may attempt to hide the property, especially a vehicle.
Most vehicles now, however, are equipped with GPS and can easily be found. In addition, attempting to hide the property is often considered a criminal act.
Do I Need an Attorney to Help Defend My Rights as a Debtor?
Yes, it is essential to have the assistance of a financial attorney if you are facing any issues related to debt collection. If you are behind on payments or are being pursued by a creditor, an attorney can help protect your rights under both federal and state laws.
Your lawyer can advise you of your rights and the steps you may take to protect your property. At the very least, your attorney can help stop the harassment regarding payments.
In some cases, your attorney may be able to negotiate with your creditor. Having an attorney may be the difference between keeping your property and having it taken away.