New ADP Garnishment Report

A valuable and groundbreaking source of data on wage garnishment has just been released by ADP, the nation's largest payroll services provider. I immediately recalled a great paper by Rich Hynes about the paucity of wage garnishments in Virginia and Illinois in the mid-2000s. According to ADP, things have changed since the recession, especially for blue-collar (manufacturing and transportation/utilities) workers in the Midwest making between $25,000 and $40,000 a year, of whom more than 10% suffered a garnishment in 2011-2013. About half of these garnishments were for child support, but the other half were for taxes, consumer debts, and bankruptcy cases (presumably wage orders entered for Chapter 13 plans). The report is available here in html and here in pdf and makes for very interesting reading.

An NPR story on this report adds a more personal touch by delving into the garnishment woes of Kevin Evans. For those who continue to posit that garnishment is designed to help creditors fight back against deadbeat debtors intent on evading their obligations, a quote from Kevin is striking: "It's my debt. I want to pay it. [But] I need to come up with large quantities of money so I don't just keep getting pummelled." The quantity of money Kevin is talking about is more than $10,000, the result of a $7000 Capital One credit card debt he incurred while unemployed during the recession, plus accruing interest at 26% and $1200 in attorney's fees. Kevin has paid $6000 this year, nearly $500 per paycheck (25% of his disposable income), but as many Slips readers will know all too well, the total debt just keeps growing further out of control.

A comment in the ADP report really caught my eye. Pointing out that these garnishments are problematic for far more than just the affected employees, ADP notes they "can result in decreased productivity and motivation that can be detrimental to the affected employee, workplace, and employer." What a breath of fresh air to see this statement in there! To avoid spillover effects onto society of creditors' externalizing the negative consequences of their poor underwriting decisions, we really need to do more to figure out better ways of finding workable compromises between debtors like Kevin and creditors like Capital One. A Chapter 13 seems like a good option for Kevin (indeed, a Chapter 7 might be better for him), and the fact that he continues to struggle with no relief in sight--to the detriment of himself, his workplace, his employer, and society--should give us cause for concern. Hang in there, Kevins of the world!

Update:  ProPublica has a nice print version of the NPR story (with a bit more more depth) and another analysis of weak debtor protections in state and federal garnishment law.

Comments

[Mechele Dickerson]

This is indeed a distressing report. Especially when you consider that it's generally harder for people to frequently discharge their debts (thank you BAPCPA) and creditors are now aggressively collecting debts through garnishments. If I recall, the npr report indicates that garnishments have been increasing for about 10 years. Wonder if that's related to the 2005 BAPCPA?

[Bryan]

As I listened to the NPR report on the radio, I was fairly screaming that someone needed to get this man to a reputable BK attorney. Unless he has a previous bankruptcy they didn't disclose, he should have discharged this debt years ago and moved on with that statutory "fresh start."

[Knute Rife]

It's expensive for an employer to process garnishment writs. Just another way we all get to subsidize creditors' collection efforts. It's also why employees who are being garnished frequently find themselves let go. As for Kevin, he's probably being fed a steady diet of, "Only deadbeats file bankruptcy." That remains the standard drumbeat out there.