Wednesday, November 21, 2007

Supreme Court Decides Against Debtors

Last week, the CNMI Supreme Court issued its decision in Triple J Saipan v. Mateo V. Norita et al. The court ruled that federal law limiting how much can be garnished from your wages does not apply in the CNMI. We unsuccessfully argued that the federal law not only applies here, but that it also 1) offers more protections to debtors and 2) more fairly spreads out the risks of credit extension between creditors and debtors.

What the Supreme Court decision means is that the status quo is maintained. Our courts turn to local law when figuring out a debtor’s schedule to pay back a debt. In practice, as I discussed in my previous post of 11/1/07, there is an uneven playing field. Low-income debtors who can’t afford an attorney end up paying something back on a regular basis, even though their income is considerably below poverty level. This will continue to happen despite the fact that debtors have the right to keep everything they need for their basic needs.

Our clients’ household income was SSI and the minimum wage (then $3.05/hour). SSI (or Supplemental Security Income), is a federal benefit entitled to those who are poor and disabled. They have already been deemed poor enough to receive SSI. Those benefits were not an issue in the case, because they cannot be taken to pay back a debt. That’s a federal law that unquestionably applies in the CNMI. On the other hand, the court endorsed a payment order against the minimum wage earner.

Today, the minimum wage in the CNMI is $3.55/hour. This comes to a gross annual income of $7,384. Under the 2007 federal poverty guidelines, the threshold amount for a household of one is $10,210 per year. Those of us living in poverty here are less protected from creditors than elsewhere in the States. This is the court's implicit opinion.

In reaching its decision, the court made a difference between a garnishment and an “order in aid of judgment,” which is the typical CNMI court order that requires a debtor to regularly surrender money to the creditor as each paycheck is received. As the court argues, a garnishment is when you take money from a third party who owes the debtor, such as the debtor’s employer. Technically then, taking money directly from the debtor is not a garnishment. Since the federal law governs garnishments, it has no bearing on our orders in aid of judgment.

What the court completely fails to take into account is that a garnishment and an order in aid of judgment have the same effect: you risk being deprived of future paychecks needed to support yourself and your family. What good is a paycheck when you have to surrender it the second you receive it?

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