ShareThisAfter two weeks without a decent meal, Van Tran looked tired and agitated as he walked into a courtroom for a hearing in May.
Tran, 55, a janitor and security guard from St. Paul, Minn., had waited for this chance to explain why a collections firm made a serious mistake when it seized $8,016 from his bank accounts -- three years' worth of savings -- to collect an alleged Discover credit-card debt. Tran held a police report showing he was a victim of identity theft.
"I just want my money back until this is resolved," Tran, a Vietnamese immigrant, recalls pleading to Judge Thomas Mott. "I need money to eat."
But speedy justice was denied Tran, as it is for many debtors whose savings or paychecks are seized in a legal process called garnishment.
Forty-four days passed before Tran got his money back. First, he filed an exemption form. Then, he appeared in court and was told to file a "motion to vacate." Unfamiliar with the term, he returned to the court with his younger brother, Phillip, who has a better grasp of English, to fill out the form. In late June, the judge ordered the money returned.
At nearly every stage of the process, the deck is stacked against consumers. In Minnesota, unlike most states, collectors can start a lawsuit without filing anything in court. If a consumer doesn't respond, they can seize bank accounts or part of a paycheck. Most states require judicial oversight. But in Minnesota, collectors can take people's money without proving in court the debt is owed.
The bad economy and the rapid growth of a new industry that collects old debts once deemed uncollectible have sharply increased garnishments.
When mistakes occur, consumers often must go to court and prove it. Their money already taken, they typically cannot afford an attorney and must navigate the court system alone. Cases get bogged down while checks bounce and bills go unpaid. Some people, like Tran, are left so destitute that they go hungry.
The process is hardest on the elderly and disabled. They often must repeatedly file paperwork to retrieve government benefits such as Social Security that are legally protected from garnishment.
Debt collectors say garnishments are a last resort. Often, by the time a bank account is seized, the debtor has been served with a lawsuit, and received a garnishment notice and many telephone calls, letters and offers of payment plans. Debtors can prevent garnishments simply by answering the phone and negotiating payment, collectors say.
Consumer advocates and some legislators counter that collectors should not be able to freeze bank accounts without court scrutiny.
Federal law says creditors can't take Social Security, veterans' retirement payments and other government benefits. But collectors routinely seize the money because they have no simple way to determine when a person's bank account has exempt income.
"The rules are so tilted in favor of debt-collection attorneys, they have no motivation to be cautious and accurate before taking a person's last remaining dollars," said Mark Heaney, a consumer attorney. "It's a legalized shakedown of the poor."
By contrast, North Carolina, Pennsylvania and Texas prohibit wage garnishments except in special cases, such as for child support or back taxes. North Carolina law allows debtors to claim exemptions for basic living expenses, such as food and rent for 60 days. Texas debtors may exempt up to $30,000 in personal property.
No national statistics on garnishments exist, but Minnesota judges approved 28,979 debt-related seizures last year, compared with 9,135 in 2006.
Financial experts say it's never been easier to locate debtor bank accounts and seize money.
Collectors can find out where a person banks from credit records or data brokers. Creditors sometimes blanket major banks in a metro area with garnishment orders and information requests, betting they will hit their target, bank regulators say.
And the window of opportunity to dispute a garnishment can seem brutally short.
Kiara Gallagher, 35, says she was distraught over her father's death in January 2007 from brain cancer and miscalculated the number of payments to settle an old credit-card debt, missing the final one. She received a notice of default in May 2007. Two months later, her bank account was emptied in two garnishments totaling $4,048, according to court documents. A small inheritance from her father was gone.
Gallagher said she called the collection law firm, Gurstel Chargo of Golden Valley, Minn., to ask how it was legal for the firm to garnish her bank account twice over a single missed payment. "The woman on the phone actually laughed at me," said Gallagher, a business consultant. For nearly a month, Gurstel didn't correct the problem, forcing Gallagher to borrow from family. Then the firm reversed one garnishment, returning $2,066, after she got an attorney who went to court.
"Even a glance from a judge would spot more mistakes than are currently caught," said Sam Glover, a consumer-rights lawyer who represented Gallagher. "Right now, it's the consumer that has to catch all the mistakes."
(Reach Chris Serres at cserres(at)startribune.com. Reach Glenn Howatt at ghowatt(at)startribune.com. For more stories, visit scrippsnews.com.)
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