Can my wages be garnished? That may be the number one question that I receive at my office from individuals who are facing a credit card or debt collection lawsuit.
In Pennsylvania, the answer is no, with conditions. Pennsylvania is one of only four states (at the time of this writing) that does not allow wage garnishment for credit card/collection agency lawsuits. Let me explain the conditions now. First, the individual must live and work in PA to be protected. Second, and this is a big one, the lawsuit must have been filed in Pennsylvania as well. If you can meet all three of the listed criteria, your wages cannot be garnished here in our state.
What is unclear is what happens if you are sued in another state? Or if you live in PA now but previously lived in another state where judgment was entered? There is not a whole lot of case law on interstate debt collection regarding Pennsylvania. There is also a bit of a conflict in the law here. Pennsylvania does not allow wage garnishment for this type of debt. However, the federal Full Faith and Credit Clause sets forth that all states must honor the judicial rulings of other states. On the other hand, our state Attorney General, although not the final arbiter on the issue, has set forth an opinion that this clause is contrary to Pennsylvania law on this issue and that wage garnishment are not permissible. A final decision needs to be rendered on this recurring subject.
Unfortunately, the fact that wage garnishments cannot occur in PA does not stop unethical debt collectors from making such a threat. That is the basis for the telephone calls to my office. Joe Debtor has defaulted on a credit card account. His account gets transferred to a collection agency. The collection agency then calls Joe and demands payment. When he advises that he cannot afford to pay, the collection agency threatens a wage garnishment. There are two problems with such a threat. The first is that the threat cannot be carried out because wage garnishment is not legal in PA for those purposes. The second is that the debt collector has just violated the Fair Debt Collection Practices Act based upon his illegal threat. If this happens to you, you will have the right to file a lawsuit against the collection agency for monetary damages.
There are a few scenarios where wage garnishment is legal in Pennsylvania. These are very limited in scope and are as follows:
1) for judgments regarding spousal or child support;
2) for failure to pay PHEAA student loans;
3) for room and board for 4 weeks or less;
4) for back rent on a residential lease; and
5) for obligations relating to a final divorce distribution.
By: Greg Artim
Posts Tagged ‘Debtor’
Pennsylvania Wage Garnishment Law
April 22nd, 2010Repossession Laws – A Review of the Legality of Self-Help Repossession
April 4th, 2010
State and Federal Courts have long struggled with balancing the interests of debtors and secured creditors when it comes to the issue of self-help repossession. Self-help repossession refers to a creditor’s seizure of property that is the security interest (or collateral) of a loan. For example, when a bank seizes a person’s car because he was delinquent on the car loan, the bank has performed self-help repossession.
Generally speaking, section 9-503 of the Uniform Commercial Code gives a secured creditor the right to take possession of collateral if the debtor falls delinquent on the loan. However, there are some limitations. For example, a creditor cannot repossess collateral if doing so involves a “breach of the peace.” A “breach of peace” is somewhat of an ambiguous term, however, the use of physical force to repossess a car for example would be considered unlawful.
Aside from litigation over whether a creditor has breached the peace, there has been a considerable amount of case law on the issue of whether a debtor is entitled to a hearing prior to repossession. The concerns to both parties are significant. The creditor is motivated to take possession of collateral quickly and inexpensively since delay could result in damage to the collateral, depreciation to the collateral, and/or time for an embittered debtor to thwart future repossession attempts. On the other hand, depriving a debtor of property without first being heard poses serious risks to the debtor. Often such “surprise” tactics leaves debtors without necessary housing or transportation. Further, repossession without a court hearing deprives a debtor without his “day in court.”
This is a similar argument to the one the plaintiff made in the Supreme Court case of Fuentes v. Shevin. That case involved the issue of whether repossession without judicial intervention violated the Fourteenth Amendment to the United States Constitution as a deprivation of property without due process of law. However, the Supreme Court ruled that the Fourteenth Amendment only protects against state action. Since a secured creditor is considered a private party, it is immune from those Constitutional provisions. The subsequent case of Flagg Brothers v. Brooks contained a similar decision and creditor’s rights to self-help repossession have generally been immune against federal attack.
If you are a debtor facing repossession, you may want to be hasty in trying to resolve the issue with a creditor. Do not expect a court hearing first or you may find yourself without transportation.
By: Noel Goodman
New Bankruptcy Laws – New Challenges
April 3rd, 2010
Most people have heard about the new bankruptcy laws. These new laws really changed a lot of things about filing bankruptcy. Making bankruptcy something that is more strict and less available.
The whole idea of the new bankruptcy laws was to limit bankruptcy filings and help to protect both the creditor and debtor. Filing bankruptcy is not an easy solution nor is it something that a person should do just because they do not want to repay debts. With that in mind the new bankruptcy laws changed the face of bankruptcy for everyone.
The new laws help to ensure people can not rush into filing bankruptcy. Now filing bankruptcy also includes getting educated which is aimed at helping to prevent filing again in the future. Additionally, some income groups are not able to file Chapter 7 bankruptcy anymore.
Thing to Consider About Filing
Filing bankruptcy is not an ending to financial problems. When you file bankruptcy due to severe financial problems then you will still have those problems even after you file. All bankruptcy can do is help you get debts under control. It will not solve your financial problems.
The new bankruptcy laws work hard to make sure that people understand this concept. By requiring counseling, when you file bankruptcy you will get help to learn how to get back on track financially and stay away form problems in the future.
Bankruptcy is hard on you and creditors. Your credit will suffer due to filing. Creditors lose money over bankruptcy. That is why new laws limit who can file Chapter 7 bankruptcies which wipe away debt and instead enforce filing of Chapter 11 where debts are repaid.
Income Limits
The new bankruptcy laws require a means test which will determine the income of the filer. If the income level is deemed high enough a person will have to file Chapter 11 and repay debts. Lower income filers will still be able to file Chapter 7.
The means test weighs a variety of factors to determine if a person can afford to repay debts under a court sanctioned repayment process.
Counseling Requirements
The counseling requirements of the new bankruptcy laws are in place to help ensure that everyone filing bankruptcy understands the process and understands the importance of getting their personal finances under control.
The counseling sessions are required before filing and then again before the bankruptcy is finalized. These classes are mandatory no matter what type of bankruptcy is being filed.
The new bankruptcy laws were put in place to stop abuse of the system and process. Creditors benefit greatly from the lower number of Chapter 7 filings under these laws. Many people who go to file must file a Chapter 11 bankruptcy now under the new laws.
Bankruptcy should always be a final option and used only after other attempts to settle debts have been tried. It is something that will go on your credit record for a while and can prevent you from obtaining credit in the future. Additionally, you can lose assets through the process that are seized to pay off debts. Overall, though, if you are in serious debt bankruptcy may be the key to getting your finances back under control.
By: Joseph Then
