Will Massachusetts law protect my property and income if the creditor wins a judgment against me?
A collection agent or law firm that owns a collection account is a creditor. A creditor has several legal means of collecting a debt. But before the creditor can start, the creditor must go to court to receive a judgment. See the Bills.com resource Served Summons and Complaint to learn more about this process.
The court may decide to grant a judgment to the creditor. A judgment is a declaration by a court that the creditor has the legal right to demand a wage garnishment, a levy on the debtor's bank accounts, and a lien on the debtor's property. A creditor that is granted a judgment is called a "judgment-creditor." Which of these tools the creditor will use depends on the circumstances. We discuss each of these remedies below.
Massachusetts Wage Garnishment
The most common method used by judgment-creditors to enforce judgments is wage garnishment, in which a judgment creditor contacts your employer and requires the employer to deduct a certain portion your wages each pay period and send the money to the creditor.
In most states, creditors may garnish between 10% and 25% of your wages, with the percentage allowed determined by state law. Garnishment of Social Security benefits or pensions for consumer debt is not allowed under federal law, but may be allowed for child support. See the Bills.com Wage Garnishment article to learn more.
Effective April 7, 2011, Massachusetts law exempts from attachment in "an amount not exceeding the greater of 85 percent of the debtor's gross wages or 50 times the greater of the Federal or the Massachusetts hourly minimum wage for each week or portion thereof (Chapter 246 Section 24). As of October 2013, the minimum wage in Massachusetts is $8.00 per hour. The federal minimum wage is $7.25.
Massachusetts provides that child-support and spousal-support payments may be obtained from obligor through an income-withholding order, as stated in Massachusetts law, Chapter 119A: Section 12. Child/Spousal Support orders for income-withholding from another state are also enforceable, as stated in Massachusetts law, Chapter 209D: Section 5-501.
In Massachusetts, wage garnishment (income-withholding) is NOT ALLOWED under Chapter 246: Section 20A if the order comes from an out-of-state court. Like other states, Massachusetts requires a judgment be domesticated before it is enforced by a local court.
Levy Bank Accounts
A levy means that the creditor has the right to take whatever money in a debtor's account and apply the funds to the balance of the judgment. Again, the procedure for levying bank accounts, as well as what amount, if any, a debtor can claim as exempt from the levy, is governed by state law. Many states exempt certain amounts and certain types of funds from bank levies, so a debtor should review his or her state's laws to find if a bank account can be levied. Some states call levy attachment or garnishment.
In Massachusetts, a bank account levy is allowed under Chapter 106: Section 4A-502. This subsection applies to creditor process with respect to an authorized account of the sender of a payment order if the creditor process is served on the receiving bank. For the purpose of determining rights with respect to the credit process, if the receiving bank accepts the payment order the balance in the authorized account is deemed to be reduced by the amount of the payment order to the extent the bank did not otherwise receive payment of the order, unless the creditor process is served at a time and in a manner affording the bank a reasonable opportunity to act on it before the bank accepts the payment order.
If you reside in another state, see the Bills.com Account Levy resource to learn more about the general rules for this remedy.
A lien is an encumbrance — a claim — on a property. For example, if the debtor owns a home, a creditor with a judgment has the right to place a lien on the home, meaning that if the debtor sells or refinances the home, the debtor will be required to pay the judgment out of the proceeds of the sale or refinance. If the amount of the judgment is more than the amount of equity in your home, then the lien may prevent the debtor from selling or refinancing until the debtor can pay off the judgment.
Under Massachusetts law, Chapter 223: Section 42, all real and personal property liable to be taken on execution, except such personal property as, from its nature or situation, has been considered as exempt according to the principles of the common law as adopted and practiced in the commonwealth, or which is specifically exempt from execution under Chapter 235: Section 34, and except as provided in the four following sections, may be attached upon a writ of attachment in any action in which the debt or damages are recoverable, and may be held as security to satisfy such judgment as the plaintiff may recover; but no attachment of land shall be made on a writ returnable before a district court unless the debt or damages demanded therein exceed $20.
If you reside in another state, see the Bills.com Liens & How to Resolve Them article to learn more.
Massachusetts Statute of Limitations
Each state has its own statute of limitations. The general statute of limitations for consumer-related debt, including credit cards, in Massachusetts is 6 years.
Under Massachusetts law, a judgment is presumed satisfied after 20 years. The statutory maximum interest rate on an unpaid judgment is 12%.
Collection agents violate the FDCPA if they file a debt collection lawsuit against a consumer after the statute of limitation expired (Kimber v. Federal Financial Corp. 668 F.Supp. 1480 (1987) and Basile v. Blatt, Hasenmiller, Liebsker & Moore LLC, 632 F. Supp. 2d 842, 845 (2009)). Unscrupulous collection agents sue in hopes the consumer will not know this rule.
Massachusetts foreclosure laws are found in Chapter 244. Foreclosure and Redemption of Mortgages. To learn more about the rules surrounding deficiency balances, please see Chapter 255: Section 13J. Deficiency balances are recoverable by a creditor:
- If the unpaid balance of the consumer credit transaction at the time of default was two thousand dollars or more the creditor shall be entitled to recover from the debtor the deficiency, if any, resulting from deducting the fair market value of the collateral from the unpaid balance due and shall also be entitled to any reasonable repossession and storage costs, provided he has complied with all provisions of this section.
- In a proceeding for a deficiency the fair market value of the collateral shall be a question for the court to determine. Periodically published trade estimates of the retail value of goods shall, to the extent they are recognized in the particular trade or business, be presumed to be the fair market value of the collateral.
In 2013, the state outlawed a lender starting a foreclosure when a homeowner applies for a loan modification.
Massachusetts Consumer Debt Collection Act
Collection agents must be licensed in Massachusetts. The Massachusetts Consumer Debt Collection Act (MCDCA) covers collection agents and original creditors. Otherwise, the MCDCA mirrors the FDCPA in most respects, with these significant additions:
- A creditor may not attempt to contact any other member of the debtor's household
- A creditor may initiate a communication with any debtor via telephone, including live call, text messaging, or recorded message, twice a week at a contact number the debtor has identified as a personal or residential number.
- A creditor may attempt to contact a debtor at any other number no more than twice a month.
- A creditor may not call the debtor's workplace if the debtor requests the creditor not do so.
- A creditor or debt collector may visit the debtor's home once every 30 days during normal waking hours.
- A creditor may not visit the debtor's workplace unless the debtor requests such a visit.
Violation of these laws is not a criminal matter, but one for a civil court. If you have been victimized by a collection agency, file a complaint with the Massachusetts Commissioner of Banks. Also consult with a lawyer to discuss filing a civil lawsuit against the collection agent. Some lawyers take these cases on a contingency basis, which means no out-of-pocket costs to you. These limits and prohibitions can be found in 209 CMR 18.00. Debt collector regulations begin at 940 CMR 7.00
Consult with a Massachusetts attorney experienced in civil litigation to get precise answers to your questions about liens, levies, and garnishment in Massachusetts.