After two weeks without a decent meal, Van Tran looked tired and agitated as he walked into the Ramsey County courtroom for a hearing in May.
Tran, 55, a janitor and security guard from St. Paul, had waited for this chance to explain why a collections firm made a serious mistake when it seized $8,016 from his bank accounts -- three years worth of savings -- to collect an alleged Discover credit card debt. Tran held a police report showing he was a victim of identity theft.
"I just want my money back until this is resolved," Tran, a Vietnamese immigrant, recalls pleading to Judge Thomas Mott. "I need money to eat."
But speedy justice was denied Tran, as it is for many debtors whose savings or paychecks are seized in a legal process called garnishment.
At nearly every stage of the process, the deck is stacked against consumers. In Minnesota, unlike most states, collectors can start a lawsuit without filing anything in court. If a consumer doesn't respond, they can seize bank accounts or part of a paycheck. Most states require judicial oversight. But in Minnesota, collectors can take people's money without proving in court the debt is owed.
The bad economy and the rapid growth of a new industry that collects old debts once deemed uncollectible have sharply increased garnishments. In Minnesota, court-approved seizures have more than tripled over four years. No one tracks garnishments taking place outside the courts.
When mistakes occur, consumers often must go to court and prove it. Their money already taken, they typically cannot afford an attorney and must navigate the court system alone. Cases get bogged down while checks bounce and bills go unpaid. Some people, like Tran, are left so destitute that they go hungry.
The process is hardest on the elderly and disabled. They often must repeatedly file paperwork to retrieve government benefits such as Social Security that are legally protected from garnishment.
Debt collectors say garnishments are a last resort. Often, by the time a bank account is seized, the debtor has been served with a lawsuit, and received a garnishment notice and many telephone calls, letters and offers of payment plans. Debtors can prevent garnishments simply by answering the phone and negotiating payment, collectors say.
Consumer advocates and some legislators counter that collectors should not be able to freeze bank accounts without court scrutiny.
"It's about fairness," said Sen. Ron Latz, DFL-St. Louis Park, who is preparing legislation to toughen state regulation of collectors. "Given the multiple errors that can occur, people should have the chance to defend themselves in court before their money is taken."
Federal law says creditors can't take Social Security, veterans' retirement payments and other government benefits. But collectors routinely seize the money because they have no simple way to determine when a person's bank account has exempt income.
Money even is taken from people who don't owe anything. Minnesota law allows collectors to freeze all accounts of a debtor -- including those jointly owned with a spouse, parent or child. Account holders must prove whose money is in joint accounts.
Last year, Robert and Mona Savig of Lake Park, Minn., argued in court that $842 should not have been seized from their joint checking account because it belonged to Robert. His wife, Mona, defaulted on a credit card. The Minnesota Supreme Court rejected their claim, ruling that creditors can presume that all the money held in a joint account is owned by the debtor.
"The rules are so tilted in favor of debt collection attorneys, they have no motivation to be cautious and accurate before taking a person's last remaining dollars," said Mark Heaney, a consumer attorney from Minnetonka. "It's a legalized shakedown of the poor."
By contrast, North Carolina, Pennsylvania and Texas prohibit wage garnishments except in special cases, such as for child support or back taxes. North Carolina law allows debtors to claim exemptions for basic living expenses, such as food and rent for 60 days. Texas debtors may exempt up to $30,000 in personal property.
No national statistics on garnishments exist, but Minnesota judges approved 28,979 debt-related seizures last year, compared with 9,135 in 2006. The total amount ordered seized was nearly $125 million last year, up from $39.4 million in 2005, according to a Star Tribune analysis of court data.
Difficult to dispute
The window of opportunity to dispute a garnishment can seem brutally short.
Kiara Gallagher, 35, says she was distraught over her father's death in January 2007 from brain cancer and miscalculated the number of payments to settle an old credit card debt, missing the final one. She received a notice of default in May 2007. Two months later, her bank account was emptied in two garnishments totaling $4,048, according to court documents. A small inheritance from her father was gone.
Gallagher said she called the collection law firm, Gurstel Chargo of Golden Valley, to ask how it was legal for the firm to garnish her bank account twice over a single missed payment. "The woman on the phone actually laughed at me," said Gallagher, a business consultant. For nearly a month, Gurstel didn't correct the problem, forcing Gallagher to borrow from family. Then the firm reversed one garnishment, returning $2,066, after she got an attorney who went to court.
"Even a glance from a judge would spot more mistakes than are currently caught," said Sam Glover, a consumer rights lawyer in Minneapolis, who represented Gallagher. "Right now, it's the consumer that has to catch all the mistakes."
For the past decade, Beverly Pittman's sole source of income has been a $740 monthly check from Social Security.
Twice last year, the law firm Messerli & Kramer of Minneapolis seized every penny in Pittman's bank account over a credit card debt incurred years ago. Each time, she got the money back after showing her income was exempt, but only after months of waiting and hundreds of dollars in overdraft and bounced-check fees.
The last garnishment, in mid-December, left Pittman with no money at Christmas. She made cookies and pumpkin bread for Christmas Eve dinner with ingredients from a food shelf.
"My grandkids always like to get something from grandma on Christmas Eve, but last year I couldn't even buy them a sucker," said Pittman, 75, who lives in Buffalo, Minn. "I spent nights crying."
Pittman decided to close her bank account. Now, she cashes her Social Security check at a Wal-Mart. She takes the cash to another store to buy a dozen money orders to pay bills. The monthly ritual takes hours. Whatever money is left, she hides in her small apartment.
"I just can't take the risk of keeping cash in a bank," she said. "The minute it's there, the collectors will take it. They're lying in wait for me."
Collectors and banks often claim ignorance of a person's protected financial status. Banks risk a lawsuit or contempt of court if they don't act on garnishment notices quickly. Banks typically don't check whether cash in an account is protected. Minnesota doesn't limit how many times a collector can try to garnish an account.
Not really protected
Mike Persellin, a Legal Aid attorney in Minneapolis, said he recently represented a mentally disabled 77-year old woman whose bank account was frozen twice by the same creditor law firm. Both times, he sent a copy of her bank account records showing that her only source of income was exempt Social Security and pension checks. Six months later, the law firm called and asked the disabled woman for her bank account information.
Legal Aid attorneys say Messerli & Kramer, the largest collections law firm in the state, routinely sends letters to people who have claimed exemptions, to find out whether their financial status has changed. Many are senior citizens living in nursing homes or disabled people with little hope of earning nonexempt income, Legal Aid attorneys said. People who do not respond to the information request may be hit with further garnishments.
"It's almost like they're trying to wear people down to the point where they just give up," said Kathleen Eveslage, a staff attorney who represents senior citizens with Southern Minnesota Regional Legal Services in St. Paul.
William Hicks, chairman of the collections practice at Messerli & Kramer, defended the practice of sending information requests. He said many debtors who receive exempt income may stop getting that income six to 12 months after they claim an exemption, making it difficult to determine when a person's funds should be seized to pay debts.
"We certainly try to avoid garnishing a debtor when we know they are receiving exempt funds," Hicks said. "However, we are often working without perfect information."
Bradley Scott, 57, an Army veteran, suffers from a rare mental disability called agoraphobia, the fear of open spaces. He can't drive or shop alone; small changes in his surroundings can trigger panic. Scott spends most of his days in his 750-square-foot house near Como Park in St. Paul, watching television, listening to blues or folk music, and smoking nonfilter cigarettes.
His hands shake as he describes how a North Dakota law firm emptied his bank account over a $3,500 credit card debt. Scott, whose sole source of income is exempt Social Security and veterans retirement benefits, discovered the garnishment when his mortgage check bounced.
Scott had to make several trips to North Star Bank in Roseville with financial records showing his income was exempt. Each time, he had to arrange an escort with a Ramsey County social services worker. The bank said it was legally required to process the garnishment and could not return the money without the collector's permission. "It was extremely frustrating," he said.
Scott got his money back only when attorney Peter Barry of Minneapolis sent a letter and made phone calls on his behalf. In the meantime, Scott paid $160 in bounced-check and overdraft fees. In addition, North Star Bank charged him a $100 fee to process the garnishment. He now questions whether he should keep money in a bank.
"If they can take my money once, what's to say they couldn't do it again?" he said.
The federal government is partly to blame. In the late 1990s, the U.S. Treasury and the Social Security Administration encouraged people to receive payments through direct deposit. For the government, the move saved the cost of sending millions of checks. But collectors and banks had no easy way to determine when deposits were protected.
In April, the Treasury proposed rules that would require banks that receive garnishment notices to look back 60 days to see if a customer has exempt income. Benefit payments like Social Security will be coded for easy identification. The rules, expected to take effect later this year, don't bar collectors from attempting repeated garnishment actions and information requests.
Finding your money
Financial experts say it's never been easier to locate debtor bank accounts and seize money.
Collectors can find out where a person banks from credit records or data brokers. Creditors sometimes blanket major banks in a metro area with garnishment orders and information requests, betting they will hit their target, bank regulators say.
Minnesota is one of just a handful of states that allow collectors to send a garnishment notice to a bank without obtaining a court judgment. As a result, the collector needn't prove in court that a debt is owed before seizing money.
Minnesota is also unusual in allowing debt collectors to start a lawsuit without filing papers in court, known as "hip pocket" filing. If a consumer calls the court, there is no record of a lawsuit, causing some people to ignore it or assume it must be a scam.
The next step -- freezing funds in a bank account -- also can occur outside the court system. To dispute such a garnishment, the debtor must initiate legal action against a creditor. Many people don't bother.
"There is more court oversight of parking violations than garnishing the last remaining dollars of the poor," said Heaney, the consumer attorney. "It's appalling."
Collections attorneys argue that Minnesota's system benefits consumers. For example, the absence of a judgment means there is no court record of the litigation; nor does it appear on your credit report. By contrast, a court judgment over an old debt can stay on a credit report for seven years, making it harder for a person to get loans or find employment.
In addition, when creditors use the court system to collect a debt in Minnesota, the courts typically tack on more than $500 in fees. That doesn't occur when money is seized outside the court system.
"Why clog up the courts with cases that will only make people poorer?" asked William Cottrell, an attorney who has taught a course on creditor/debtor law at William Mitchell College of Law in St. Paul for the past 11 years.
Hicks of Messerli & Kramer, said keeping garnishments out of the courts benefits people who owe small-balance debts and can pay quickly without judicial intervention. Even so, Hicks said his firm doesn't pursue such garnishments. He worries that consumer attorneys will challenge them as unconstitutional.
"I don't need to be in one of their lawsuits," he said.
Sea of legal papers
Van Tran's living room floor is a sea of legal documents, a daily reminder of his battle to undo a garnishment that never should have happened.
After his bank account was frozen, Tran discovered that his 30-year-old son had stolen his name along with his Social Security and driver's license information and used them to apply for a credit card. His son used the card to buy a new car, then promptly defaulted. Tran filled out a police report accusing his son of identity theft.
"It was the hardest thing I ever did in my life," he said.
Forty-four days passed before Tran got his money back. First, he filed an exemption form. Then, he appeared in court and was told to file a "motion to vacate." Unfamiliar with the term, he returned to the court with his younger brother, Phillip, who has a better grasp of English, to fill out the form. In late June, the judge ordered the money returned.
In the meantime, Tran lived almost entirely on Ramen noodles. Occasionally, he snuck home food from his parents' home -- too embarrassed to tell them what had happened. He borrowed from his brother to pay utilities, but his check for his property taxes (written before the garnishment) bounced. Tran paid $103 in overdraft and bounced-check fees.
On the day he got his money back, Tran says he celebrated by buying a bouquet of fresh flowers and fruit for his elderly parents. He then said a prayer of thanks beneath the Virgin Mary statue that stands, arms outstretched, on his mantelpiece.
"I thanked God for giving me strength," he said.
Tran now keeps little money in his bank account. He pays big bills in cash, including his July mortgage payment.
He doesn't blame the courts. The clerks at the courthouse patiently answered questions and helped with the forms. But he understands a double standard when he sees one.
"It's very easy for the collectors to take your money," he says. "But it's very hard for people like me to prove we are victims."