Everyone, here is a New Jersey post. I get enough hits and actually a few questions about this that it pays just to make it a post.
As I mentioned a while back, in the mid to late 1990′s, I had some dealings with the Goldman & Warshaw firm. So I feel I have some insight into their “business model” of practicing law.
If you are hitting Hoofin to You! based on a Google search, it might be becuase you have received in the mail either a creditor’s complaint, or alternatively, a wage garnishment request, with Goldman & Warshaw representing the other side.
Elsewhere on my blog, I point out that I am an attorney in New Jersey. But what I am giving out here is not legal advice. You need to find someone “back home” (not in Japan) to give you that. What I am discussing here is more everyday advice about our state court system and just life in general. It is “life advice”.
1. “Oh my God! Oh my God! I just got a notice from the county Special Civil Part that my creditor is taking me to court!!! Goldman & Warshaw are the attorneys!”
This is going on a couple hundred times a month, at least, all over our great state. And has been for at least 15 years.
First some history:
What used to be, is that if you fell behind on some bill (like a credit card bill), you dealt with the collections department of whoever lent you the money. You made arrangements and you got the thing taken care of. What used to be the “dirty little secret” is that you sometimes didn’t have to come up with one dollar for every dollar you owed. The company might take 70 cents or 50 cents on the dollar just to even it out and be done with you. (And you with them.)
Sometimes the original creditor would utilize a “third party debt collector” who might be a little more aggressive. This was a collection firm who was going to be paid a cut of whatever they got from you. So if they could collect the full bill, they would keep a piece and send the rest to the original creditor.
In the 1970′s—which was another time in America when the country overall was seeing a tough economy, ’74 especially—these third party debt collectors got out of hand. Early in the Carter Administration (1977), Congress passed a law to regulate these agents, called the “Fair Debt Collections Practices Act” (FDCPA). The FDCPA, if you knew about it, could really put the hammer to collection agent abuses. It restricted what the debt collector could do with you, and to you, to try and get you to pay up.
In 30+ years, practically nothing has been done to update the law, by the way.
About a year later (1978 or ’79) began both this massive boom in consumer lending, and a revision to the bankruptcy code making it easier to go under.
Throughout the 1980′s, more people started to have trouble being overextended. But the use of the bankruptcy court was not as popular as it was to become in the 1990′s and 2000′s. I think nowadays 40,000 people go under a year. Which in a state of 8,500,000 means 1/2% go to bankruptcy every year.
So when you get that letter from Stanley D. Goldman or his firm, or you get the notice to show up in Special Civil Part, the first thing you do is take a deep breath. Cry if you want, but don’t panic.
2. The Goldman & Warshaw (and their copycat law firms) special edge
Stanley D. Goldman exploited the loophole in the Fair Debt Collection Practices Act that it doesn’t cover attorneys when they aren’t acting as third-party debt collectors. (In 1986, Congress covered attorneys acting as debt collectors. BUT NOT attorneys acting as attorneys.)
So that aggression that previously had been associated with the collection agency industry was simply moved one step down the line, to our Special Civil Court system and what you might call New Jersey’s “Collection Bar”—attorneys who specialize in collecting small-to-mid-size debts.
3. New Jersey Superior Court, Law Division, Special Civil Part (a/k/a “Special Civ”)
The Special Civil Part acts as, among other things, a turbocharged small claims court. Anyone can bring suit for things like contract damages (which not paying a credit card or other debt is), up to $15,000 last I checked.
If people have higher damage[s], they have to go up to regular Law Division, or accept $15,000 as the most they can recover. (I think you can also get lawyer fees outside the $15,000).
As a small claims-style court, Special Civil is meant to be a one-day affair where the complainant (the person suing you) brings their facts, you bring your defenses, and the judge decides. Like “The People’s Court” on TV years ago. In most counties, they try to get you to do the mediation or arbitration program. (In some counties this might be a mandatory first step). But you always have the right to talk to the judge in the end.
Depending on your situation, if this is debt that you actually owe, you are probably not going to have much success winning. If the debt isn’t yours, then yes, you better make your case! In New Jersey, if the debt is older than six years (meaning you haven’t done anything with it like pay it or even reaffirm the obligation), then you have likely met the “statute of limitations” for it [still] to be valid. [This is to say, if the debt is older than six years in New Jersey, it might still be debt, but the creditor cannot come after you in court and collect anything.]
Debt goes bad and at some point it is not enforceable anymore. Yes, it is still debt, but the court won’t do anything about it because the creditor “sat on their rights”—waited too long to sue you.
What will likely happen is that if it is your debt, and it is within the statute of limitations, you might be able to argue any crazy tacked-on fees the creditor is seeking. But otherwise, you are going to get a judgment against you.
There are some internet posters out there who will list all these ways to try and get around a debt. But my feeling is, if it really is yours, then you need to do what people who get behind have done for ages: pay or make arrangements.
The worst that happens on court date is that you walk out with a judgment against you, where before you had an overdue debt against you. You maybe owed someone $7,000 that you couldn’t pay. Now the State of New Jersey is saying, yes, you do owe that $7,000.
It was no mystery the day before Special Civil Part, right? And none afterward. Except afterwards, the creditor (judgment creditor) gets extra tools to try and get money from you. The one that Goldman & Warshaw have rigged throughout the state since the 1990′s is the wage garnishment.
4. How wage garnishment is supposed to work, and how it actually has worked, in New Jersey.
New Jersey law, at NJSA 2a: 17-50 provides that if a judgment creditor asks for a wage garnishment, which is like a special “tax” on your wages in favor of the creditor, then the judge shall grant one. It’s been the law since about 1904 in the state—over 100 years.
Where this has been abused by Collection Bar firms like Goldman & Warshaw is that they have misled the courts and/or judgment debtors that the maximum garnishment (10% of your wages up to about $27,000, and then higher above that) is the ONLY garnishment amount a judge can grant.
Goldman & Warshaw goes in asking for the 10%. Back in the 1990′s firms like that used a case out of Atlantic City that said a garnishment must issue to mean that a garnishment for the maximum must issue. And in places like Somerville, which had a real dumb-ass for a judge sitting in Special Civil Part around 1996-1998, this falsehood was bought hook, line and sinker.
Although, I have recently been told by the judge who is the chief administrator of the New Jersey courts (Judge Glenn Grant) that the Special Civil Part courts are aware that they have flexibility on this garnishment, for me, proof is in the pudding. I have to hear back about that.
The little nugget of wisdom I can hopefully impart to you is that if you are dealing with Goldman & Warshaw (or that Pressler firm), is just be aware that the state does not mandate a 10% garnishment! There is supposed to be a finding of fact, as part of what’s called “due process”, to determine what it is you can afford. And it’s the judge’s job—that’s what the judge is there for.
You borrowed the money under a promise, but someone lent it to you. And if you are stuck and can’t pay back, yes, you have a problem. And you kind-of did it to you. But somebody lent it to you and so it’s not that the problem is 100% your fault. It may be 99.999% you. But there was some other actor in it.
So if the Special Civil Part courts are as “progressive” now as Judge Grant led me to believe, tell the judge in your Special Civil Part matter what you can afford to pay. Goldman tries to get you pay some big number after they can wave the judgment in your face. But if you can’t pay it, let the judge know when Goldman tries for the garnishment.
My own feeling is that when Special Civil Parts start ordering $5 a week garnishments, it will do a lot to shut down the Goldman & Warshaw aggression tactics, or at least make them think through their “business model”. If you can only pay $5 a week (and there are federal laws that would limit even that, if you are making very little money), that’s all the court system of our state should be ordering as relief to the creditor.
Some states, like neighboring Pennsylvania, don’t even have wage garnishment on contract debts. For taxes, yes, but taxes are always a special case ’cause your stiffing the public, not a private company.
So as “life advice”, that’s what I think. Own up to it, but ask the court for any help it can give you.
5. Bankruptcy as the very, very last option.
This is part where I think Goldman and his ilk really smell. Using the court system to scare people into paying up. But in fact sending any number running to the bankruptcy court house.
The idea of collections is to get money back. Not to play the law or large numbers with a state population and scare 20% of the down-and-out into bankruptcy (nobody gets anything back) in order to squeeze the other 80% who don’t want to do a bankruptcy. It’s like the creditors who don’t employ Goldman get wiped out because Goldman is acting overly aggressive on behalf of his client.
Now, to me, if you get a judgment against you, it’s not the end of the world. Pay, or make arrangements. If you get a wage garnishment order against you, it’s a little embarrassing, but again, not the end of the world. In fact, in New Jersey, it’s a bit of breathing room if you have other creditors also chasing after you—since they would have to wait in line. Which may be years. And they would be much more likely to try and get any small amount they could from you instead.
But my advice is that bankruptcy is always the last option, after you’ve tried everything else. It’s basically saying, “I can’t pay it, and under no foreseeable circumstance in the future, will I be able to.” And yeah, some people hit that, you know. There are these people buried by or torn up with these huge number debts (like six figure). Plus an “underwater” mortgage on their house. Can they get out from under? Probably, over time.
But it is a lot of energy and frustration. The people have to sit and negotiate, deal with it week-after-week. It’s doable in the sense that people do do it–they do get out from under even the big numbers– and it goes on all the time. But it’s a lot of grief, and usually you need a creditor who is going to work with you.
Small beans collecting, like Special Civil Part, should not send you to the bankruptcy court! It is a tragedy in our state that it has in the past, and firms like Goldman & Warshaw should be somewhat ashamed that they pushed small debts through a sort-of mass production system like that.
In earlier eras, this sort of consumer lending at high interest and excessive litigation by those same lenders would have been seen as scandal and a disruption to the community. This was why there was (and still is actually!) a usury law (30% in NJ, but not on out-of-state lenders like Delaware banks). It’s why some states only allow judgments to be collected off specific assets, not income.
New Jersey has sometimes been in the forefront of good law. But sadly to admit, it’s also sometimes been so far behind the curve that we look silly as a state.
This whole small beans debt collection is probably one of the latter.