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Collection Actions: 11.4.3.1.6 Treasury rule

In 2011, the U.S. Treasury Department adopted a rule that requires banks to protect up to two months of Social Security, VA, and certain other federal benefits184 that are direct-deposited into a bank account.185 This rule is discussed in detail in § 15.3.11, infra.

Collection Actions: 15.3.11.9 The Role of State Protections; Preemption and the Safe Harbor

The Treasury rule fills a significant gap. Federal law has long provided an absolute exemption for Social Security and other benefits but did not specify any effective mechanism for implementing this protection. State laws have also generally recognized the exemptions, but their procedures placed burdens on the beneficiary that often resulted in freezing or even loss of the protected funds.

Collection Actions: 15.5.1 Introduction

A number of states provide a specific exemption for a certain amount of money in a bank account. Others make a wildcard exemption available for this purpose. These exemptions are examined in § 15.5.2, infra.

Collection Actions: 15.3.11.6 Continuing Garnishments and Repeat Garnishments

According to the Treasury Department, in a few states creditors can obtain continuing garnishments of bank accounts, requiring the bank to monitor the account and garnish funds as new deposits come in.471 The rule prohibits a bank that is served with a continuing garnishment order from complying with that order’s ongoing requirements.472

Collection Actions: 11.5.2 The Automatic Stay

The automatic stay is a fundamental cornerstone of bankruptcy law,280 triggered instantly upon the filing of a bankruptcy petition. It stays almost all actions against the debtor and the debtor’s property.281 With few exceptions, the automatic stay stops creditors from taking collection actions, pursuing or continuing a court case against the debtor, or seizing any property of the debtor based on debts that arose before the debtor filed the bankruptcy petition.

Collection Actions: 17.3.1 State Constitutional and Statutory Limits

Imprisonment for debt is prohibited in all or nearly all the states and the District of Columbia.28 These prohibitions represent a break with the rule that had prevailed in England until 1838, which allowed body attachment or a writ of capias ad satisfaciendum as a means of enforcing a civil judgment for a debt.29

Collection Actions: 17.2.3 Imprisonment and Other Sanctions for Failure to Appear at a Debtor’s Examination

In most, if not all states, the debtor can be held in contempt of court for failure to appear at a debtor’s examination.12 Debtors frequently fail to appear at debtor’s examinations because the notice is written in obtuse “legalese,” they have no means of transportation to the examination site, or they are unable to miss work without risking job termination. A debtor who fails to appear for a debtor’s examination may feel compelled to pay the debt because of the fear of incarceration.

Collection Actions: 18.1.8.1 Generally

A number of state statutes and court rules provide that the court can require a plaintiff to pay the prevailing defendant’s attorney fees when the plaintiff’s claim was groundless (or words of similar import). Thus, a consumer defendant can recover attorney fees after prevailing in a collection action by asking the court that has just ruled for the consumer to also award the consumer an attorney fee award because the collector’s action was groundless.

Collection Actions: 18.1.8.3 State Statutory Standards

Like Federal Rule of Civil Procedure 11, a number of state statutes or rules provide attorney fees for a prevailing party when there is no evidentiary support for the other party’s claims, when a claim is brought without “substantive justification,” when there is “no justiciable issue of law or fact,” or when the claim is “groundless.”60 For example, fees have been awarded under such a statute when the collector sued an identity theft victim without sufficient basis.61 Such standards should

Collection Actions: 18.3.5 Important Steps to Take After Cleaning Up a Credit Report

After the dispute is resolved to the consumer’s satisfaction, look at the consumer’s report again in three to six months to see if the disputed information has in fact been changed or whether it has been changed and then improperly reinserted.114 At the same time, review the inquiries section of the report to see if the collector continues to obtain copies of the consumer’s report even after the judgment, when the collector is no longer a creditor and no longer has a permissible purpose to request the report—an additional FCRA violation.

Collection Actions: 18.5.2.3 Choice of Federal or State Court

The consumer who wants to litigate FDCPA claims in federal court will have no choice but to bring a separate action for litigation misconduct, instead of raising FDCPA counterclaims in the collection action. Except under very unusual circumstances, the consumer cannot remove a state court collection action to federal court because the existence of a counterclaim based on federal law does not create federal jurisdiction.143