Expert: Regan Shinski - 4/29/2010

Question
QUESTION: To make a long story short I'm in the process of trying to resolve my husband's collection problem.. He has a judgement for 899.73 from 2007 and in 2008 they levied over 600 dollars form his bank account, but only showed a credit of 213.00 to his account. They put in towards penalties I'm guessing.. Is that legal, so right now they are showing a balance of 644.17 plus fees a total of 1047.57 I offered to pay 644.17 which is basically the original judgement amount minus the 213.00.. Although I didn't know that when I gave the offer.. So they laughed in my face and repeatedly said we have judgement, and aren't going to budge but 88.00.. What do you suggest I do next.. I know I'm in reality making a generous offer, but how can I prove that to them, or am I'm more ignorant than I think!! Please help, I don't have the money to pay the full amount and I fear another levy.. We want to use our little bit of tax return to make it disappear.. Thank  you!!

ANSWER: Hi Jeannie:

I sorry you are in this position and wish I had better news for you.  The following comment is not directed at you but at other people that may be facing similar situations:

I ALWAYS advise people to do what they can through credit repair, settlements, or legal action to avoid getting a judgement placed against them for this reason.

Now, for your situation, you have little options if they don't want to negotiate.  You can start to protect your assets from a bank levy by changing banks and accounts or moving to a cash/money order environment.  This will not solve it long term but give you short term peace of mind.  If you have social security, disability, retirement, or any other type of protected income, you need to open a separate bank account and ONLY - and I MEAN ONLY - deposit those protected funds into that account.  If you do that, those funds should be protected from a levy.

Remember, a judgement may stay in place indefinitely until paid, so you have to eventually deal with this one way or another.

Sadly, you have little options to fight this or "make" them negotiate in better faith.  They have the hammer of the judgement.  It is why they fight to get it and why we try fighting to prevent it at all costs.

One of the things you may want to look into is how the penalties and fees were arrived at.  Issues of interest and legal fees often vary by state law, so I really can't address your specific case but try calling a consumer advocacy or governmental agency that can assist consumers in cases like this.  It may take a few calls to find someone that can help you get the answer to the question of if the amount they are trying to collect is legal.  An attorney can also answer this.

Another option is to start credit repair.  The goal is not to necessarily clean up your credit but get the collector in a violation of the Fair Debt Collection Practices Act (FDCPA).  This violation of federal law - and its minimum $1,000 penalty - is then used as to negotiate and/or offset your debt and clear the judgement.  This is a long and complicated process but it CAN be done.  It takes a HUGE amount of research and knowledge or you can hire a credit repair company (like us) or attorney do help.

Finally, the most drastic action is the best option if your ONLY goal is to get rid of this debt.  That option is bankruptcy.  Assuming the debt is not for a tax lien, student loan, child support or other non-dischargeable debt, a chapter seven filing typically would clear the debt.  It really destroys your credit, costs money, and may not be worth it to you but I mention as an option.  This is prudent especially if you have significant other debt you are having trouble paying.  You need VERY good legal advice before proceeding with this action.

If you can make the creditor think you are REALLY going to file bankruptcy - and that you qualify for bankruptcy - they may be more willing to take less than the judgement amount.  It's really all a poker game.  Just make sure any settlement you enter into is in WRITING before you send ANY money.

Good luck.  I hope this helps,
Regan

---------- FOLLOW-UP ----------

QUESTION: Is it legal for them to have taken over 600.00 without crediting all of it towards the collection itself and allowing him to accrue even more interest?

Do they have the right to levy any account of mine, beings I'm his wife, even if he isn't on the account?

Can they legally levy from a business account?

Thank you so much for your time!

Answer
QUESTION: Is it legal for them to have taken over 600.00 without crediting all of it towards the collection itself and allowing him to accrue even more interest?

ANSWER:  Yes, if the total amount added was legal - see original answer.


Do they have the right to levy any account of mine, beings I'm his wife, even if he isn't on the account?

ANSWER:  This depends on the legal status of the debt but more importantly whether you live in a community property state.  I really can't answer for sure but the answer is "possibly."  More likely if you live in one of the community property states that mostly out west.


Can they legally levy from a business account?

ANSWER:  They can if the debt was in the business name or if the business co-signed for the debt.  They can also do this if they can establish a link to business.  For example, if the debt was used to by a bunch of roof shingles and those shingles went onto your home, a reasonable link could be established.  Additionally, they can "break the corporate veil."  This means if the business does not keep proper records for licensing, accounting, and other means they can establish that it is essentially a shell and mixes funds with private accounts.  Courts have been more open to breaking the protection of a corporation in recent years so this is possible with sloppy business practices.

However, this is typically a risky and time-consuming process for the creditor often costing them money to get it in place but it is possible.


Good luck, I hope this information helps.
Regan