National news exposed another monster rearing its ugly head to drown already flailing debtors.
The New York Times reports today that wage garnishment is on the rise: up 30 to 120% depending on the state. This news comes as a kick to debtors who are already down, buried in insurmountable debt.
Under federal law, the garnishor must leave the debtor with 30 times the federal minimum wage per week. However, when taking into consideration the federal minimum wage is $7.25 per hour, this means the creditor only has to leave the debtor $217.50 per week to live.
In Florida, creditors can garnish up to 25% of a debtor’s disposable income, which means if you make $800 a week after taxes, they can garnish up to $200 of your paycheck every week until the debt is paid. Debtors are only allowed to take the lesser of the two, which usually results in them following the 25% option. But losing even 25% of their income is a devastating blow to debtors who are already struggling to keep their head above water.
Banks claim the problem is the debtors, who refuse to return phone calls and ignore lawsuits. In the long run, ignoring the lawsuit actually creates a larger problem for the debtor. Banks get default judgments and collect astronomical interest rates on the debt as high as 79.9% per year. Those kinds of rates are enough to make organized crime syndicates smile.
On top of that they tack on outrageous attorneys fees, because the debtor is not showing up to fight. In many cases, the banks are able to get a default judgment without ever having to prove the debt, much less justify to a judge the fees and penalties they are charging.