May 30, 2016

Georgia’s Likely New Pre-Garnishment Notice Not All Good News

wage garnishment; bank account levyGeorgia may soon have a new law governing wage garnishments and bank account levies.  But the news is not all good.

You may recall that back in September, 2015, I reported that federal judge Marvin Shoob had issued a ruling that invalidated on Constitutional grounds bank account levies in Gwinnett County, Georgia. A man named Tony Strickland sued the Gwinnett County clerk of court after his bank account containing workers compensation and Social Security funds was seized by a credit card company that had sued him. Mr. Strickland argued, and Judge Shoob agreed, that the credit card company had an affirmative obligation to notify debtors like Mr. Strickland that certain funds (like workers’ compensation benefits, Social Security benefits, welfare payment and similar benefits) were exempt from garnishment.

Although the federal judge’s ruling was limited to bank account levies in Gwinnett County, most legal experts concluded that the principle set out in the judge’s order was applicable generally to all bank account levies and wage garnishments within the state of Georgia.

Following this ruling, most judgment creditors stopped or carefully audited all post-judgment collection activities.

New Georgia Notice Requirements

In response to the federal judge’s ruling, several Georgia state legislators have introduced bills to modify Georgia’s post-judgment collection laws to meet the standards set out by Judge Shoob.

Senate Bill 255, passed on Tuesday, February 2, 2016 requires creditors to notify debtors that money originating from Social Security, workers’ compensation and welfare is protected from seizure. The bill now moves to the state House, where it is expected to pass, and then to Governor Deal, who is expected to sign the bill into law.

What does this mean to you?

First, you need to understand that the proposed legislation doesn’t change the protected status of benefits received from workers comp., welfare or Social Security. Those benefits have long been protected whether in check form or after they have been deposited into your bank account. The new law is mostly about providing notice.

What this new law may do is reduce the pressure on struggling debtors who are trying to survive on benefits. If your only source of income is workers’ comp or Social Security, for example, and a debt collector calls to demand payment, that bill collector will also have to notify you that your benefit payments are protected from seizure. We may see fewer instances of bill collectors intimidating confused and frightened debtors into issuing post dated checks, or worse, allowing electronic access to bank accounts.

Presumably judgment creditors would have some burden to investigate whether the accounts of judgment debtors contains protected money and they would be liable for damages if they fail to honor the protected status of seized funds.

It’s Still “Buyer Beware” for Georgia Consumers

If you are on the receiving end of a judgment, I think that you still need to take steps to protect yourself. First, you need to be careful about co-mingling your benefit funds with other monies. Only funds directly attributable to Social Security, workers comp., and welfare are protected (and these funds remain protected even after deposit). A problem arises, however, when these protected funds are co-mingled with unprotected funds such as income from part time work, rental property income, or wages earned by a spouse if that spouse is also a judgment defendant.

You don’t want to be in a situation where your possibly protected funds are seized and you have to hire a lawyer to go to court to argue that some or all of the funds seized are exempt from garnishment or levy.

You would be wise to segregate your funds by asking your bank to create a sub-account of your main checking or savings account that contains only protected funds. And if you have any cash in unprotected accounts, use those funds first to pay necessities.

I would also continue to advise my Social Security disability and workers’ compensation clients to protect themselves by notifying their banks and the suing creditors that they have a protected subaccount and to stay away from this account. If the creditor ignores your written notice, you would have an even stronger claim for damages against that creditor or collection agency.

Don’t Ignore Lawsuits

Finally, I want to again remind you about the importance of taking action if you are sued. Back in September, 2015 I wrote a post entitled Don’t Fall Prey to Illegal and Immoral Behavior by Debt Buyers. The gist of that post was to warn you that there are companies – debt buyers – that purchase stale debt for pennies on the dollar and attempt to collect on it. Stale debt refers to accounts for which the statute of limitations for collection has expired. In other words, you have no obligation to pay a statute of limitations barred debt.

However, if you don’t know that the statute of limitations has run and an aggressive bill collector calls you, you might agree to pay the debt and even reboot the statute of limitations. In more egregious cases, debt buyers actually sue unsophisticated debtors to collect stale debt and if the debtor does not respond and deny the claim, the debt buyer may obtain a judgment that can be turned into a wage garnishment or bank account levy.

The big picture here is that consumers still have relatively little protection against well funded credit card companies, collection agencies and debt buyers. My colleague John Skiba, a nationally known bankruptcy and debt defense lawyer in Arizona, notes that in his jurisdiction over 95% of “junk debt buyer collection lawsuits” end up in a default judgment. In other words, 95% of collection defendants ignore lawsuits.  I suspect default rates in Georgia are similar.

While a bankruptcy lawyer can sometimes undo the damage, you may find yourself paying a lawyer to deal with a problem that could have been easily dealt with early on.

This is why it is so important to always take action if you receive a lawsuit or even if you hear a rumor that you are being sued. Most of the metro Atlanta courts offer electronic access and I can usually find out in a few minutes if there is a pending or defaulted lawsuit.

Again, despite the efforts of the Consumer Financial Collection Bureau, and despite the new notice requirement that will likely become part of Georgia law, you have to be diligent and advocate for yourself. If you are facing collection it truly is a jungle out there.

I’ll leave you with a quote from Georgia State Senator Jesse Stone, who filed Senate Bill 255: “the sooner we get it in the law, the sooner everybody will be back in the business of collections.” If you are struggling with overdue consumer debt, that certainly does not sound like good news.

About Jonathan

Jonathan Ginsberg represents honest, hardworking men and women in the Atlanta area who need personal bankruptcy protection. In practice for over 25 years, Jonathan teaches bankruptcy law and practice at legal continuing education seminars and he is a founding member of the Bankruptcy Law Network. Jonathan lives with his wife and children in Atlanta.

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