It is not unusual for consumers to view collection agencies as the ‘bad guys’. After all, who among us really wants to be hounded by people trying to collect debts? Credit collection laws are designed to protect debtors against abuse from creditors. But do debtors have an unfair advantage?
Judgment debtors are the perfect example to look at here. A judgment is a different kind of debt in the sense that it has been established by court order. In other words, a creditor has taken a debtor to court and won his case. The decision rendered against the debtor includes a monetary award.
How Collection Is Different
Because money judgments are established by courts, the debts they represent are subject to a different set of collection rules. As an example, creditors can collect judgments by seizing and selling debtor property. That is not possible under the rules of standard debt collection. Yet despite having this ability, judgment creditors may still be at a disadvantage.
There are rules in place designed to protect the rights of judgment debtors. But do the rules go too far? Given the fact that the vast majority of money judgments are never successfully collected, I am inclined to believe so.
How Debtors Are Protected
State laws recognize the fact that debtors need to be protected against overly aggressive creditors. Otherwise, we would revert to the days of debtor’s prison and poorhouses. One of the ways debtors are protected is income shielding.
For example, federal law prohibits garnishing a debtor’s wages at a rate higher than 25% of his disposable income. Some states go above and beyond by limiting garnishment further. The truth is that, while garnishment can be an effective means of collecting a judgment, it also takes a long time.
In addition, certain types of income cannot be garnished. They include:
- Unemployment benefits
- Social Security and SSI benefits
- Public assistance payments
- Child support payments
- VA benefits
Some federal employee and civil service retirement benefits are also off limits. That does not leave judgment creditors much to work with. So while garnishment is possible, it might not yield enough to be worthwhile.
Other Forms of Protection
Judgment debtors enjoy additional forms of protection as well. Asset protection takes the form of exemptions for certain types of personal property. For example, some states do not allow taking a debtor’s primary vehicle for payment of a debt. Similarly, a homestead exemption would prevent a creditor from seizing a debtor’s primary residence for payment.
In terms of legal protection, debtors generally have the opportunity to appeal the court’s original decision. They can also contest garnishments. They can claim certain exemptions from both garnishment and seizure.
Finally, both creditors and their collection representatives – like Salt Lake City’s Judgment Collectors – must follow strict rules governed by federal fair collection laws. There are certain things an agency like Judgment Collectors can and cannot do.
The Bankruptcy Option
Perhaps the most effective protection a debtor has against collection is bankruptcy. You could say that bankruptcy is a judgment debtor’s secret weapon. Although some types of debts cannot be discharged through bankruptcy, most civil judgments can be – with the exception of tax bills, civil and criminal finds, and child support/alimony.
Laws designed to protect judgment debtors against abusive collection practices are valid. But it is equally valid to say that some of the laws go too far. They give debtors an unfair advantage that allows them to hold out and stall until creditors eventually give up and walk away. But that’s the way the game is played.
