Each year, thousands of New Yorkers find themselves unable to keep up with financial obligations. If you find yourself unable to pay down your debt and having to deal with debt collection, the repercussions can make the situation overwhelming and paralyzing.
Learning the ins and outs of the debt collection process and where to get help, can provide some much needed guidance and hope if you ever find yourself in this situation.
We decided to speak with consumer law legal aid expert, Evan Denerstein, Staff Attorney at MFY Legal Services, Inc., in order to learn more about the consumer debt issue in New York State and what you should do if you find yourself in this situation.
Can you tell us a little bit about the consumer debt collection situation in New York?
Credit card debt is the most common form of debt. We also see a lot of people being pursued for rent arrears, medical debts, student loans, and utility arrears. One problem that we see a lot in New York is improper service of court papers. I would say that the vast majority of our clients are not served properly, and many of them are not served at all. Another major problem we see is debt collectors harassing or providing false information to consumers. The extent of each of these problems has decreased somewhat over the past few years in New York City, as the City has begun licensing and regulating process servers and debt collectors. However, there is still room for improvement in both areas. Fortunately, the Department of Financial Services will be issuing statewide rules around debt collection. We are hoping that these rules will be even more protective of consumers, in addition to extending debt collection rules throughout the state.
New York also has pretty strong exemption laws, meaning that certain amounts and types of income and assets are not allowed to be collected by private creditors. For example, 90% of earned income is exempt from garnishment. And bank accounts containing $1,920 or less cannot be restrained by a debt collector collecting on most debts. If the person’s account is receiving exempt income, such as SSI or unemployment insurance, that amount goes up to $2,625.
What are the first steps individuals should take to address debt collection?
It depends where they are in the debt collection process. As a general rule, consumers should get as much information as they can from the debt collectors in order to make sure that they are dealing with a legitimate debt and not a scam or a case of mistaken or stolen identity. For example, if consumers are receiving debt collection letters and phone calls, they should request verification of the debts, which they can do at any time under New York City rules, and within 30 days of the first contact under the Fair Debt Collection Practices Act. If consumers receive a summons and complaint, they should make sure to file an answer within the time allotted and seek help from CLARO (see below). Consumers should also check their credit reports regularly to guard against inaccurate information from appearing on them.
What should people do if they don’t have the money to pay off their debt? Should they just file for bankruptcy?
The answer really varies from person to person. It depends on the person’s sources of income, age, types of debts, future earning potential, and many other factors. If a person is considering bankruptcy, it is a good idea to first speak with a bankruptcy attorney or a free financial counselor, such as one you can meet with at a Financial Empowerment Center in New York City. Bankruptcy is a great option for some people, but it is not for everybody. Generally, we do not recommend bankruptcy for people who only receive exempt income and have no non-exempt assets, as their income and assets are already protected from creditors under state and federal exemption laws. However, if someone has income that can be garnished and a high amount of debt, bankruptcy might be a sensible option.
What kind of assistance can people expect to receive if they visit one of CLARO’s NYC’s locations?
People can expect one-on-one help from a highly competent volunteer attorney who is being supervised by a consumer law expert. CLARO provides assistance to unrepresented litigants at every state of a debt collection lawsuit, including help with answers, discovery, motions, and trial preparation. Litigants are welcome to come back as often as they need; however, it is possible, or even likely, that the litigant will meet with a new volunteer attorney at each session.
CLARO visitors can also receive referrals to the Volunteer Lawyer for the Day program, where they will be paired with a volunteer attorney to represent them during their next court appearance.
You recently launched a Consumer Debt Portal on LawHelpNY.org. What do you wish to accomplish with this information portal?
We hope that the consumer portal will be a valuable resource that will empower consumers who are struggling with consumer-related legal issues. The portal will contain valuable and easy to understand information for people who are facing a variety of consumer issues, including debt collection, student loan default, credit problems, identity theft, and fraudulent sales practices.
Do you have any new projects or initiatives to help empower New Yorkers to tackle their debt?
The New Media Advocacy Project and Fordham Law’s Feerick Center for Social Justice teamed up to create a groundbreaking know-your-rights series of videos that will soon be featured on LawHelpNY.org. I have had the opportunity to preview some of the videos, and they are incredibly good – both very informative and viewer-friendly. I think visitors to LawHelpNY will find them very useful.
1. Visit LawHelpNY’s Consumer Portal page for a one-stop-shop which features know your rights videos, resources, as well as links to online forms that will help you create important documents, and information on clinics which offer assistance – LawHelpNY Consumer Portal Page.
1. Are you going through a debt collection process and are overwhelmed? Share your story with others and get tapped into a community of people ready to help. Visit our personal debt discussion group.