Basic Collection Advice for Low-Income People
Many low-income people owe money to stores, banks, and agencies. When debt collectors call, it is hard to know what to do. And collectors often make threats. As a result, many people agree to pay money to collectors even when they don’t have to.
Know your rights
Many low-income people are judgment-proof. This means that a person has so little income and property that no collector can get any money out of them, no matter how much they owe. Many kinds of income and property are “exempt”. That means that the collector cannot legally get it from you. Some collectors try to scare people into paying “voluntarily” because they have no way to collect money legally.
The following income and property are all exempt:
- Income from public assistance, Social Security, SSI (Supplemental Security Income), Veterans Benefits, Unemployment Insurance, and many pensions and similar payments is exempt.
- Income from wages up to $175.50 a week after taxes is exempt. Above that amount, the collector can only get 10% of gross wages.
- Basic household goods, including a TV set and a worker’s tools, are exempt. No one can legally take them to satisfy a debt unless the debt is for the money to purchase the items in the first place. Some collectors threaten that if a person does not pay, the collector will send a sheriff to their house to take and sell the person’s property. For most low-income people, this is an empty threat. While the sheriff or a City marshall could come to their house, the sheriff would not find anything except exempt property and would have to go away without taking anything. In practice, few collectors even bother to send the sheriff because they know that, most times, it won’t be worth the effort.
One of the easiest ways for a collector to get money is to take it from a person’s bank account. This is legal unless the account has in it only exempt income. For example, many people have their Social Security or SSI directly deposited in a bank account. As long as they do not put any other money in the account, the account cannot be taken by a collector. Unfortunately, a collector can sometimes use legal procedures to freeze an account even if it contains only exempt money. Having an account frozen, even temporarily, can be a nuisance.
To unfreeze an account, first try to convince the bank or the collection attorney, that the account is exempt. If this does not work, you have to go to court. If the judgment against you is in Kings County Civil Court, the clerks in that Court (at 141 Livingston Street, 9th floor) help people to file papers to get their accounts unfrozen. Another Fact Sheet entitled “How to Vacate a Judgment in Civil Court” gives step-by-step instructions. The other possibility is to get a lawyer.
People who have large amounts of debts may also want to consider bankruptcy or credit counseling. Through bankruptcy, a person can get out from under all or most of their debts and get a “fresh start.” Most bankruptcies are done by lawyers, but it’s sometimes possible to do one without an attorney.
Credit counselors help people work out ways to pay off their debts over a period of time. Make sure to use a credit counselor from a non-profit (charitable) program. One large non-profit credit counseling program is BUCCS. For information on BUCCS call (212) 675-5070. They charge modest fees.
Special rules apply to some kinds of debts. For example, up to 25% of a person’s wages can be taken to meet obligations to pay child support and spousal maintenance. Debtors also have less protection when the debt is owed to a government agency or when money is owed on a student loan. People who owe money to the government or on student loans may sometimes have income tax refunds taken without a court proceeding.
Don’t believe everything you hear
Some collectors will say almost anything (true or untrue) to get people to pay debts “voluntarily.” Many people get scared or confused and pay out money that they really cannot afford and that they don’t have to pay as a matter of law. Don’t pay without knowing and asserting your legal rights. And don’t pay a little because you think that will make the collector go away. It won’t.
This article was posted May 05, 2008
