Photo credit to dreamsjung. Click photo to view his Flickr page. 

Last fall, the National Consumer Law Center released a report, "No Fresh Start: How States Let Debt Collectors to Push Families into Poverty" in which it surveyed the exemption laws in each state. Exemption laws are laws that describe the limits of what a creditor can take from a debtor in order to collect on a judgment.

How much of a worker's paycheck can a creditor garnish? Can it foreclose on a debtor's home? Can it seize the debtor's car? What about household goods? Can a creditor take those to collect a debt?

These questions are largely answered by state, not federal, law. And, if you're a debtor in Kentucky, the answers are not good. The NCLC gave grades to all fifty states based on the protections the state has in place to ensure that a creditor's collection efforts cannot push a hard-working family into destitution.  

Kentucky is one of four states to receive an "F". (Mississippi, Michigan, and Delaware were the other three.)

The NCLC graded the states on the following criteria: 

• Preventing debt collectors from seizing so much of the debtor’s wages that the debtor is pushed below a living wage;
• Allowing the debtor to keep a used car of at least average value; 
• Preserving the family’s home—at least a median-value home;
• Preventing seizure and sale of the debtor’s necessary household goods; and
• Preserving at least $1200 in a bank account so that the debtor has minimal funds to pay such essential costs as rent, utilities, and commuting expenses.

Kentucky failed all of these tests. 

• Kentucky workers can keep only 75% of their paychecks (or 30 times the federal minimum wage). Some states prevent garnishment of wages altogether. Others set the limit of what can be garnished at a much lower percent than 25% of a worker's check. 
• Kentucky gets a "D" for protecting a debtor's car. Kentucky law protects cars up to $2,500 in value. Any more than that and a creditor can seize the car to collect on a judgment. Other states protect cars worth up to $20,000 (Kansas) while others set the limit much higher than the unreasonable $2,500 Kentucky law provides (many states protect cars worth up to $7,500 or $10,000). 
• Kentucky homeowners who owe a creditor money have essentially no protection. Kentucky law protects the value of a home up to $5,000. NCLC rightfully gives this law an "F". Seven states protect homes from collection efforts regardless of value, while another 5 states protect homes up to the median value of a home ($211,312). 
• Kentucky law protects $3,000 worth of a debtor's household goods. This earns us another "F". Eight states protect all necessary household goods and another nine protect at least $10,000 of household goods.
• Finally, Kentucky law provides no protection from seizure of funds in a debtor's bank account. Other states set a limit of $1,200: below that amount, creditor's cannot go. Another "F" for Kentucky. 

The NCLC has drafted a Model Family Financial Protection Act that will protect the basic dignity and financial integrity of Kentucky's families, even those struggling to repay debts. I encourage my politically-minded friends and my friends that are legislators to take a close look at the NCLC's report and recommended legislation and work to do a better job protecting our families from debt collection efforts that push them into poverty and bankruptcy. 

At Ben Carter Law, I defend people from baseless collection efforts, prosecute debt collection abuses, and help people file for bankruptcy to get a clean financial slate. But, I wish Kentucky's laws did more automatically to help families protect the basic necessities of life from collection efforts and trust that the day is coming that the legislature will change the laws to benefit Kentucky's families, not creditors.  

I get a lot of questions about how to report identity theft. Here is the step-by-step instructions from the Federal Trade Commission.  

When I was in Palau in December, the Island Times was nice enough to publish this letter. 

Dear Palau,

Palau needs a bankruptcy code. I did not know that four years ago when I was working as a Public Defender for Palau, but I know it now. Too many Palauans live with crushing debt from which they will never recover. If Palau wants to provide those families any hope, it needs a bankruptcy code that offers Palauans a fresh start following financial devastation.

I have spent most of the last four years defending homeowners in Kentucky from foreclosure. That is, I have spent the last four years discussing debt and household finances with thousands of families.

While I was a Public Defender in Palau, I had the opportunity to take a few civil cases for debtors who owed either a store or another person a significant amount of money. Unfortunately, the only relief I could provide was trying to negotiate a complete repayment of those debts over the course of a number of years—often at usurious interest rates. These negotiated settlements were frustrating and unsettling to me personally because it meant that these debtors would have to struggle for years if not decades before saving for retirement, investing in their or their children’s education, starting a business.

Allowing people to file for bankruptcy wouldn’t just help individual Palauans who find themselves in over their head due to unemployment, medical setbacks, or poor financial management. Rather, there are at least five distinct benefits to providing Palauan individuals and businesses with a fresh start through bankruptcy.

• Bankruptcy encourages economic development because it enables entrepreneurs to take risks with the understanding that if those risks don’t pay off, their lives and finances are not forever ruined.

• Bankruptcy also encourages economic development by incentivizing investors and businesses to lend only to the most creditworthy entrepreneurs and customers.

• A bankruptcy code would provide business partners with an orderly and predictable disposition of a failed business’s assets. This predictability reduces the cost of doing business and the cost of litigating the dissolution of the business.

• Because the bankruptcy code provides parties with an orderly way of winding down businesses and discharging indebtedness, the court system may enjoy less litigation and fewer collections actions.

• As I previously mentioned, Palauans deserve a fresh start. With a bankruptcy code, Palauans will know that getting laid off, encountering bad luck, or suffering through medical setbacks won’t forever plague their family’s chances at financial stability.

I hope you will not interpret this letter as the presumption of a haole thinking he knows what’s best for Palau. Having lived in Palau, I appreciate that Palauan bankruptcy will likely look very different than American bankruptcy—molded to respect tradition and the realities of life in Palau. But, I counseled plenty of hardworking Palauan families who will spend years struggling to pay back loans at unfair interest rates, struggling often with no realistic chance of ever actually catching up.

While I was in Palau, I failed to appreciate the benefits of having a bankruptcy code and failed to do anything to provide these families and individuals with the hope of a fresh start and the opportunity for financial stability. Now that I’m off-island, I look back and fear I missed an opportunity to leave a lasting impact in Palau and provide a lasting service to its people by advocating for passage of a bankruptcy code.

I am on-island over the holidays for a brief vacation and wanted to take this opportunity to urge the Palauan people to encourage their legislators to pass a bankruptcy code. To survive and thrive, Palauan families and businesses need the opportunity at a fresh start that bankruptcy promises.

I am happy to help this effort in whatever way I can from the United States. If you are interested in working on this issue, please contact me at ben [at] bencarterlaw [dot]com.

Sincerely,

Ben Carter

I didn’t think practicing law was going to be fun. This weekend, I am at the National Consumer Rights Litigation Conference, hosted in Chicago this year by the National Consumer Law Center (NCLC). Three years ago, at their conference in Portland, the NCLC showed me just how much fun being an attorney was going to be.

I could sue banks. I could defend homeowners. I could pursue creditors who pursued my clients. I could make them pay. Wow.

If you went to an Occupy Wall Street gathering and found the prevailing attitude towards banks a little tame, this conference is for you.

I’m learning about consumer arbitration agreements, consumer class actions after Concepcion, credit reporting, loan modifications, payday loans, predatory lending, auto fraud, expert witnesses, lemon laws, foreclosure mediation programs around the nation. The speakers include the great Paul Bland and Deepak Gupta (who argued Concepcion and who shared 30 minutes of his time with me in his office while he was at Public Justice. Last night, Matt Taibbi addressed the members of the National Association of Consumer Advocates (NACA); we gave him our annual Media Award for his work publicizing the dastardly deeds of foreclosing servicers, banks, and attorneys. Today, we’ll hear from Susan Saladoff, director of Hot Coffee and I’m spending all morning with Ron Burge. Tomorrow, I’m attending the Consumer Class Action Symposium.

I like so much about this conference. So much. I like that I learn about both the substance and procedure of practicing consumer law. I like that this conference gives me big ideas about expanding what I can do for my clients and big ideas about what I can do to change the terms of debates in the public sphere: debates about our civil justice system, mandatory arbitration, the utility of foreclosure mediation. Each year, I come away energized and inspired. These attorneys are so good.

The odds we face are enormous. The monied interests have bought our politicians, they’ve funded aggressive public relations campaigns that seek to close the courthouse doors to you and me. But, the NCLC and NACA and Public Justice (and KJA) are working hard to make us better attorneys for our clients and better advocates for the system of justice for which our founders fought.