Exemptions from Collections

State Law Exemptions from Collection

Try This If You Are Garnished

Collection is an extremely unpleasant thing, and you will want to avoid it if possible. That means not allowing anybody to get a judgment against you.

We don’t include this information here to help you avoid collection, however. This information should help you understand the legal status of your assets for purposes of your negotiation planning. Remember: you should think long and hard about giving a debt collector any protected assets (which all of these exemptions are), but that does not mean you should never do so. These exemptions are the exemptions provided under Missouri law (paraphrased – look up the law for exact statutory language), but different states have very different rules on some of these exemptions (most notably on homesteads). For an exact  understanding of all the exemptions under your state’s laws, we suggest you google the term “exemptions from levy” plus your state’s name.

There are specific procedures you would follow in order to claim these exemptions if a levy (garnishment) occurred, but again, we include this information simply as a guide to understanding the legal character of your assets.

513.430 RSMo. 2010 et seq. provides the following exemptions:

1.         Household furnishings and goods, clothes, appliances, books… held primarily for personal, family or household use of the debtor or a dependent, not to exceed $3,000 total.

2.         A wedding ring worth not more than $1,500, plus other personal jewelry worth no more than $500 total.

3.         Any property, of any kind, not to exceed $600 in value in total.

4.         Implements, professional books or tools of the trade of the debtor or a dependent worth not more than $3,000.

5.         Any motor vehicle worth not more than $3,000.

6.         Any mobile home used as the principle residence but not on or attached to property owned by the debtor, worth no more than $5,000.

7.         Any unmatured life insurance contracts.

8.         Amount of any unaccrued dividend or interest under, or loan value of, any one or more unmatured life insurance contracts.

9.         Professionally prescribed health aids for debtor or dependents.

10.       Right to receive social benefit, unemployment compensation, or a local public assistance benefit, veteran’s benefits, disability, illness or unemployment benefits, or a stock bonus plan (etc.).

11.       Right to receive money or property traceable to a payment on account of the wrongful death of an individual on whom the debtor was dependent (with some limitations).

12.       A homestead consisting of a house and appurtenances and land worth not more than $15,000.

Why You Can Probably Beat the Debt Collectors

(Even If You Couldn’t Win the Lawsuit!)

If you will stand up for yourself, you can probably make the debt collectors go away even if they could win the suit against you. (Which they usually can’t.)

Why?

Follow the Money

It’s all about money, right? They want to make money. That’s why they’re suing you. If you will defend yourself it becomes too expensive for the company to pursue the litigation against you.

Let’s Do the Math

Consider the question from the point of view of the debt collectors. They buy debt cheaply (very, very cheaply), file sut in large numbers, and win the vast majority of cases without a fight. In St. Louis County, the “call dockets” often have 300-600 defendants, most of whom are being sued by a handful of debt collectors represented by two or three lawyers. If it takes an hour or two for the lawyers to get one hundred judgments totaling (by my guess) approximately $400,000 to $1,000,000 dollars, that’s a pretty good hour’s work.

Now look at the Petition in your lawsuit, down at the last paragraph near the end (where it says “wherefore, plaintiff prays…”). If the company is asking for attorney’s fees against you at all, they’ll usually say so right in the “wherefore clause,” and you may be surprised at how small the number is. In Missouri, the number is typically 15% of what they’re suing you for. If the company is suing you for $5,000, the attorney’s fees might be around $750, but that’s only if they are suing on a contract that allows attorney’s fees. In fact there is often no request for attorney fees at all in the suit.

They ask for the same amount whether or not you fight.

If you don’t fight the case, they get a windfall. If you do fight the case, they usually don’t get any more money even if they win. Instead of hoping for several hundred thousand dollars per hour of work, they’re trying to get $150 per hour-if that. That’s a lot less fun.

And if they are not suing you on a contract that specifically provides for attorney’s fees, they don’t get any fees for fighting no matter how long it takes. Every second you make them spend fighting with you costs them money that they will not get back. Everybody on the other side knows all this, and they never forget it. Neither should you.

What Would You Do…

What would you do if you were a debt collector who was bogged down in a suit for a few hundred (or even thousand) dollars-but which could cost just as much in attorneys fees. And on the other hand you could make a hundred thousand dollars in an hour of work by picking out other people to sue instead? Debt collectors are practical people. If you stand up for yourself in a way that shows them they will have a real fight on their hands, they will usually drop the suit. It isn’t worth it with so many other people around who will not fight.

Isn’t that what you would do?

Requiring Verification – Your Secret Weapon against Debt Collectors

When you get the first notice that a debt collector is after you, you should get an opportunity to “dispute and request verification.” That right is provided by the Fair Debt Collection Practices Act (FDCPA). Click here to get your free copy of the FDCPA. This video here explains why you should dispute the debt and require the debt collector to verify it. In other words, always seek verification  And this video shows you how to do it, and how it affects some of your other rights, because often a debt collector will either disappear completely once you seek verification or will fail to provide verification but still harass you – a violation of the FDCPA.

But remember this does not work if they file suit against you – if you don’t answer a lawsuit when it is filed, you will lose the case. See Bogus Right to Verification on Petition – Dirty Trick! If you have already sought verification but not received it, you might file a motion to dismiss based on their failure to verify.

Here’s what to do if they fail to verify the debt before suing you.

When debt collectors contact you for the first time, they are supposed to send you a written notice of your right to dispute and require them to verify the debt. They are to inform you that you have 30 days to send in this dispute, and if you do so, they are supposed to “verify” the debt prior to taking any further collection actions.

Now, to be clear, we do not think the “verification” to which you have a right under the FDCPA amounts to much, but we do, in fact, recommend making sweeping demands of the debt collector. At a minimum, you may get some materials that will be useful if they decide to sue you. And there’s a pretty good chance that disputing the debt will cause them to go away and leave you alone. I have never had a satisfactory explanation for why this might be, but it appears to be the case. Therefore it makes sense to demand verification when you first hear from a debt collector.

Take NOTE

This right to verification does not extend to law suits. If they serve you with a lawsuit, you must answer the petition or lose the case. You HAVE NO RIGHT TO VERIFICATION ONCE THEY FILE SUIT. But if they have contacted you, and you have demanded verification before they filed suit, then they should verify before filing suit. Failure to do so violates the FDCPA.

Also note two other things: your dispute should be in writing – they don’t have to verify if it isn’t. And while you have only thirty days to make the dispute, they can take any amount of time in providing that verification – it’s just that they cannot make other attempts to collect the debt until they do.

Repossession in the Real World

This article “pulls back the veil” and lets the average consumer take a look at what goes on in repossession. This should help you decide what to do if you’re struggling with car payments and wondering what repossession might do to you.

Repossession of cars and trucks, like making sausages and politics, undoubtedly has its benefits, but the actual process can be extremely unjust and disturbing to watch. This article is going to pull back the veil and let the average consumer take a look at what goes on in repossession. This article should help you decide what foreclosure could do to you if you’re struggling with car payments and wondering what actions to take.

Deal Gone Wrong

It is well-known that, when you buy a new car it depreciates substantially as soon as you drive it off the lot. In plain English, that means the car is worth much less money right after you buy it than before you own it. Depending on the size of your down payment, then, you could very well be, and most often probably are, “under water” on the loan-the car is worth less than you owe. For this reason, I prefer to buy used cars, myself, but if you don’t, and you buy well, things will eventually straighten themselves out. Provided you can continue to make the payments, the car will lose value more slowly than the note does. But what if something comes up and you can’t make the payments? That’s when you’re in for a rude surprise.

After missing a payment, you will find the auto dealership has become very interested in you. They will call and write. And they’ll keep calling and writing until your payments are current. If you can’t pay, the dealership will eventually suggest you return your car-or the idea might occur to you. If you don’t return the car, the dealership may send out “repo men” to repossess the car. You may go to your accustomed parking place only to find the car gone. They won’t leave a note, either.

But not too long later, you will probably get notice that your car is to be sold “at public auction” within a certain amount of time. They may tell you about a “right to redeem,” which at least in some states is your right to make good on the payments and get the car back. Let’s assume for the present example that you can’t do that. Let’s say (to keep the numbers simple) that the purchase price of the car was $15,000, and you made a down-payment plus other payments of $5,000. The car is two years old now, and its “blue book value” is down to $8,000. So you figure that after the company sells the car, you’ll owe about $2,000, right?

Repossession in the Real World

Wrong! A month later, you’ll find out that the car was sold for $2500. They charged you $250 for the “repossession fee” and another $250 for “reconditioning.” So they “credited” your account with $2,000 against the $10,000 you owed, and now they want another $8,000 from you. They send you a letter outlining everything they’ve done. You had a camera worth $200 in the glove compartment, and you ask about that. They tell you it’s “lost.”

That’s repossession in the real world.

Outsmart Dirty Debt Collectors – Make them Pay

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Should I talk to a Debt Collector and What Should I Say

If you are being called or harassed by a debt collector, one of the purposes of that debt collector is to get you to talk. Should you? This is going to depend on whether you have anything to say.

Debt Collectors Target Struggling People

As I have mentioned before, the debt collection business is targeted at distressed people. The debt collectors already know you don’t have much money, and they know you probably have other people trying to get money from you. Their job is not to force you to pay somebody—it’s to force you to pay them. Another way to put that is that they are not competing with you—they’re competing with other debt collectors. You are the football in a game between the debt collectors, the string in a game of tug of war. Does that make sense?

Silence Can Be Golden when Dealing with Collections

The job of the debt collector is to get you to pay them instead of someone else. They can do this either by annoying you so much that you pay them to get them off the phone or by establishing a sympathetic connection to you so you gladly do it for the voice on the other end of the line. Both of these methods involve keeping you on the phone and the connection open, and neither of these methods is directed at your well-being. Also, if they can get you to reveal information about your job or bank, or any kind of assets you have, they can improve their chances of making you pay against your will. So unless you have your own purpose for communicating, you shouldn’t do it.

Sometimes it Makes Sense to Talk to Collectors

What might be a good reason for you to communicate? Well, because you want something tangible from the debt collector to whom you are speaking. You could want them to reduce interest rates, waive penalties, agree not to give information on your debt to the credit reporting agencies, or any number of actual, materially beneficial things. If you’re hoping to get a friendly voice or understanding, a debt collector is the wrong person to talk to: they already understand everything they want to know about your situation. Talk to someone else for that.

Negotiate—And Get It in Writing

Don’t be afraid to negotiate. You can ask for anything from them, and in most cases the debt collector could give you anything you might request. So be bold. If you want to settle for ten cents on the dollar, you can ask. They may laugh—but laughter is just a part of the negotiation and doesn’t mean they won’t do it. And if they agree to do anything, you must get the agreement in writing. In a practical sense, it doesn’t count if you don’t get it in writing. You won’t be able to prove it, and in some cases an oral “modification” would not even be legally recognizable even if you could prove it. It must be in writing.

They’ll want something in return. An immediate payment, an agreement to pay by a certain date, something. You can agree to this if you can do it, but you’re spinning your wheels if you cannot, so it makes sense to limit your promises to things you’re sure you can perform. Don’t over-commit, as this may negate the agreement you reach and will almost certainly increase the number and hostility of the phone calls you are receiving. Remember that the debt collector is keeping records of everything you say (so don’t tell them where you work or bank).

Stop Talking to Collectors When You’ve Said What You Need to Say

And when you run out of reasons to keep talking to the debt collector, make sure that you actually stop talking to them. There is always a price for anything you say – you’re giving them free information that they will use to decide to sue you. Sometimes talking to them is worth that price, but if that changes, you should feel no obligation to keep talking.

What about Partial Payments?

We think partial payments are bad unless you know exactly how you will pay the whole debt and unless you understand what making the payment will do to you. To read more on this issue – and you really should if you’re even thinking about making a partial payment, click here: Never Make Partial Payments.

Silence is Golden – Part 2

I mentioned the mini-Miranda right in Part 1 of this article, and I have already spoken several times about the importance of silence. Why do I keep mentioning this? That’s right – because people forget it so often. Debt trouble erodes our confidence and makes us self-conscious. Debt collectors like to use your sense that you are failing in some important, moral way, when you don’t pay, to push you around. And people like to “tell their story” and make themselves understood.

Save it for the jury

Nothing you can say to the debt collector will help you in any way. You won’t persuade them you are good, that your debts are unreasonable or unmanageable, you can’t hurt their feelings in any way that helps you. You can’t cause them to delay or decide against taking any significant action.

And almost everything you do can, by contrast, be used against you one way or another. Asking for a little extra time to pay the debt? That’s an admission the debt is yours to pay. Asking them to reduce the interest rates? That’s a form of negotiation which may eliminate their need to prove any specifics of the debt and may extend the statute of limitations significantly. Say something to try to hurt the feelings of the debt collector who has been calling you several times per day? That’ll be something you hear back at trial.

If your debt troubles are going to persist in any significant way, you need to close your mouth.

Don’t Talk to the Debt Collection Lawyer

And you need to keep it closed if they sue you. Talking to the debt collector’s lawyer only magnifies the chance that you’ll say something that hurts you. In that situation, not only can you say something that damages your case, you can make an admission that kills it. I can’t tell you how many people have told me that they “told the lawyer the debt was there’s but…”

If you admit the debt to the lawyer – or to anyone on the debt collection team – you may be letting them off the hook of proving they own the debt or that you owe it. Once that happens, you will find their willingness to reduce the amount they want you to pay much harder. That’s because until they prove that you owe them the money, they must consider the risk that they cannot prove these things and, further, consider the cost it would take to prove them. These are major risks for debt collectors who do not have any original records and only the sketchiest information on the supposed debt. Solve these problems for them and you triple the value of the debt. Now they only have to worry about the expense and delay of forcing you to pay.

And you must also keep your mouth shut to the judge

In many ways, this is the toughest. Judges are stern, and they’re accustomed to having almost complete control over the people in their courts. This makes it extremely difficult and even risky to refuse to answer a judge’s question. Instead, you must be a master of double speak. If the judge asks you if this was your account you’re being sued for, you have to say something like, you’re not sure, but you don’t think the plaintiff has or can prove it. And then you say you’re not sure they can prove they own the debt or how it was accumulated. If the judge asks whether you dispute the amount of the debt, again you point to the debt collector’s duty to prove it. “I’m not sure what the debt, if any, was,” you say. “But it’s the debt collector’s job to prove it, and they can’t use hearsay…” It is your right to dispute the debt and require the debt collector to prove its case. Don’t let the judge’s desire for an early lunch hour keep you from insisting on that right.

To Sue You or Not to Sue You – What Matters to Debt Collectors

If you are behind in paying some bills and are considering negotiating with someone bugging you for money, what are the factors you need to consider as you prepare for and then talk with them? We have discussed elsewhere the need not to “give away” information carelessly. In this article we discuss the negotiations more from the point of view of the collector. You’ll need to know this as you decide what to do.

As simple as it seems, the first question is whether you are dealing with an original creditor or debt buyer, or debt collector. Their perspective makes a lot of difference. With that in mind, we’ll look at negotiations with the three categories of counter-parties you will encounter: original creditors, debt buyers, and actual debt collectors (firms retained to try to collect money for the original creditor).

Original Creditor

Original creditors are, usually, the businesses that actually made a deal with you in the first place, typically via a consumer transaction. Dealing with original creditors, because they are lots of different businesses in the business of doing whatever they do, is much less predictable than dealing with debt collectors or buyers, who generally have standardized procedures for talking to you.

Original creditors are in business to do business, and not to collect money. Depending on the size of the company and the person to whom you are talking, trying to collect money may be the worst part of the person’s day. He doesn’t want the bother, and spending time collecting money could be taking away from much more important tasks. Also, every business owner is aware that the business’s reputation could be hurt either by being too aggressive or by provoking harmful responses.

Even in larger companies (excluding auto sales, which are designed with collections in mind), the person talking to you will have other considerations than just squeezing the last dollar out of you. Most original creditors – even banks and credit cards – don’t want to sue you, so the chances are good that you won’t get sued without plenty of warning. Companies that are not set up to litigate normally fear and avoid it – with very good reason – and an original creditor must also be concerned about reputation with other customers and clients in general.

 

As a general rule, original creditors would rather not do things to damage your credit (although the bigger the business the less they care about this in my experience), and most small ones might not even be set up in a practical way to do so. On the other hand, because original creditors are not in the business of suing and do not think of the bills strictly as numbers, it can be difficult to get them to stop thinking that you must pay all the money you owe, although people will have different perspectives on this for lots of reasons.

Depending on how their business is doing, original creditors could be much more or less aggressive in chasing you. For a smaller company, chasing you is difficult and impractical, and at some point the owner will settle for far, far less than you owe just to put the experience behind him or her. If they do sue you, chances are pretty good they’ll have what they need to prove you owe the money, but not necessarily the resources to keep after you to try to collect the judgment.

Debt Buyers

Debt buyers are pretty much the opposite of original creditors. They really have no other business than collecting money other people earned. Whereas the original creditor may have budgeted primarily for production and sale of goods, and been surprised by having to try to collect, debt buyers budget exclusively for collection and have no other significant costs. Nor do they have the same concerns about public opinion – they aren’t vulnerable to market forces. On the other hand, they are further from the original transaction and often have trouble obtaining the records they need to beat you in court if push comes to shove.

Bottom Line

What all that means is that whereas original creditors are somewhat reluctant to negotiate with you but sometimes have to for practical reasons, debt buyers are all about negotiating with you, and have a harder time winning, but are more willing to sue you anyway. They are designed to extract money from you, in other words.

A debt buyer can do you some harm on your credit report by reporting your debt, but in reality the main harm will have already occurred if your original creditor reported the debt. Debt buyers cannot clean your record of credit damage caused by the original creditor, so you can only negotiate to get them to stop reporting you.

Debt buyers purchase debts for widely different amounts, depending primarily on how old the debt is. Exactly how the figure is determined is a closely guarded secret, but the purchase is usually made by auction of large numbers of debts packaged together. Not all debt buyers are willing to sue you under any conditions, incidentally. They will telephone you endlessly and then, eventually, sell the debt to another company. And some debt buyers routinely sue without even any kind of warning. The biggest of the debt buyers seem to call for a while and then sue.

If you are negotiating with a debt buyer, there are a number of things you need to bear in mind. For a full discussion of that, you will want to get the Debt Negotiation Dashboard. Bear in mind that while debt buyers are less equipped to sue you, they are more ready and willing to do so, than most original creditors. But since they are in the business of extracting dollars from people without a lot of money, they can take a more realistic view of how much you can pay if you want to. And remember, you can negotiate to get them to stop hurting your credit report, but you can’t get them to wipe clean the debt from whatever the original creditor did.

Actual Debt Collectors

Actual debt collectors can negotiate with you, but they draw their real authority to do so from the original creditor and will have to take any request for a deep reduction in amount or change of terms back to the original creditors (although they will have some discretion over smaller changes). Debt collectors are more “numbers” oriented, however, so it might be possible to get them to accept an offer that the original creditor previously turned down.

Usually, when the bill is sent to the debt collector, the original creditor will stop negotiating with you – so if you call up and want to talk about the debt, for example, they will refer you to the debt collector. In that situation, the debt collector will keep a significant amount of anything you pay – 25% or more is not unusual. What will frequently happen, however, is that the debts will eventually be returned to the original creditor. If you can time that correctly, you might have an opportunity for a steep discount, because the next step is to sell the debt for a small fraction of its nominal value or to let it go entirely. The advantage of catching the debt before it gets sold, of course, is that you can make cleaning your credit a part of the deal.

Debt Collector not Original Creditor

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Secret Danger of Garnishment to Social Security Recipients

As I have pointed out in my video about garnishing Social Security, Social Security benefits are exempt from most forms of garnishment – the notable exception to that rule is that they may be garnished by certain government entities.

Although Social Security benefits are exempt from most forms of garnishment, I warned that they could still be attached and taken if they are in a bank account that the creditor happens to find. When bank accounts are garnished, they are held by the bank for a time to allow you to fight the garnishment. As a practical matter, you may be unable to fight the garnishment, and thus if you are having trouble paying your bills and have paid for them with an account that holds Social Security benefits, it makes very good sense to switch those benefits to another bank (not just bank account in the same bank) – because once there is a judgment against you the debt collector is bound to attempt to seize any assets in a bank they have on file for you. I realize this can be difficult or disruptive, but if you have paid an original creditor or debt collector out of an account, you must expect that account to be garnished – seized and taken away from you – if the debt collector manages to get a judgment.

If it is seized, you may or may not be able to get the money back, but there will certainly be a delay, and all the money in the account, up to the amount of the judgment, will be held by the bank and unavailable to you.

There is another danger to Social Security recipients.

Social Security recipients are often elderly or disabled, needless to say, and many of these allow other people to do shopping for them or to hold their assets in one way or another to use for their benefits. This money is held in trust and should not be available to debt collectors who are after the person who is holding the money.

Here is an example that might make it clearer. If Mary (a 70 year old woman suffering from Altzheimer’s) is being taken care of by her son Tom, Mary and Tom will frequently find it helpful to allow Tom to use Mary’s account to pay her bills. If Mary’s account contains only Social Security benefits, it should be beyond the reach of any creditor, and because the money is not Tom’s at all, it should not be reachable by Tom’s creditors in any event.

However, sometimes debt collectors will discover that Tom is paying bills using Mary’s account. If his name is on the account, or if he is permitted to write checks upon it, the debt collectors may attempt to garnish the account.

This is not as “evil” as it may first appear. From the debt collector’s point of view, how do they know what bills Tom is paying with the account? People have often tried to hide assets from debt collectors by using other people’s accounts, and the law is designed to let go after the debtor’s money regardless of whose name it is.

On the other hand, the impact of Mary’s account being seized for Tom’s debt can be devastating. Because once again the money will be held out of use for a period of time that allows the parties to prove whose money it is and whether it can be seized. During that time, the elderly person cannot pay her bills, may be evicted, or face other, life-threatening and disrupting events.

Get Legal Advice

Therefore, if you have a judgment against you on a debt you should seek the advice of a lawyer specializing in debt collection before allowing the account to be linked to you in any way. In my opinion, the risk extends beyond just having your name on the account. If you sign checks on behalf of someone else and there is a judgment against you, you may be putting this person at risk. Get legal advice and protect them and you. Better yet, don’t let a debt collector get a judgment against you.

Protect Your Rights

If you are being harassed by debt collectors and worry about paying your bills, you need to be extra alert to protect your rights. These calls are often a prelude to their suing you. Bankruptcy can sometimes be an option, yet it has very high costs. It’s worth considering defending yourself first. Membership with our site gets you our teleconferences and ecourses for free, plus gives you many other benefits. Click here for more about debt law and how we can help you.