Debtor inequality and Nebraska’s gerrymandered debt collection playground
Sometimes you are so close to the problem your experience and anecdotes lead you to further empirical investigation. That is what happened to me when I realized in the early 1990s that I was advising more single women, single mothers, divorcees, widows and retirees about filing bankruptcy. I reviewed thousands of Bankruptcy Court files from the 1960s to the 1990s. This research revealed that starting 1990s in Nebraska more women filed bankruptcy than men, suggesting the feminization of poverty. This made front page news in USA Today and fueled Elizabeth Warren’s arguments on gender financial inequality.
More recently Paul Kiel in ProPublica and Neal Gabler in The Atlantic, identified Nebraska as the state that had the most debt collection judgments, wage garnishments and executions on bank and checking accounts, and for small amounts. A small amount for a creditor, less than $100, may not be a small amount for a debtor. Nebraska was collection agency heaven.
I saw lots of people being sued, getting default judgments, being garnished at the place of work and having their bank and checking accounts liquidated. This is what happens when you don’t or cannot pay your bills. Was I was blind, or near sighted, to how apparently Nebraska’s practices were harsher than in any other state. Even Nebraska’s official garnishment forms make a presumption that garnishment should occur at the 25 per cent levy rate because the judgment debtor is assumed not head of a family.
Scholars and investigative journalists compared collection practices around the country. This revealed that Nebraska’s collection practices are out of line with the rest of the country. Remember that in the Federal System States can maintain or abolish penalties as ghastly as the death penalty. Nebraska has declined to take advantage of Affordable Health Care provisions which would relieve financial stress and looming bankruptcy on low income sick Nebraskans. So too Nebraska state debt collection procedure are onerous and disadvantageous to the poor.
The review of practices and statistics across America found Nebraska was the least friendly to working debtors and friendliest to collection agencies, which spurred people with relatively small judgments, but financial disequilibrium when they got garnished, into filing bankruptcy.
Two things should happen. The investigators should receive a MacArthur genius award. And, Nebraska should look at its state court collection practices and bring them into line with more humane prevailing national practices. Debtor’s prison is gone. Increasing the minimum wage goes a long way to ending debt and wage slavery. It reduces reliance on payday loans, and rewards labor with a living wage.
© Oliver B. Pollak, Attorney at Law