The CNMI Supreme Court ruled today that the CNMI laws do not permit the Superior Court to order unemployed judgment debtors to seek work.
The case, Marianas Eye Institute v. Pitness Moses, 2011 MP 1, involved a Chuukese man who worked for six years in the garment industry and then lost his job when the industry left the islands. He has been unemployed ever since. While unemployed, he was bushcutting and something flew into his eye, so he sought help at the Commonwealth Health Center. The CHC referred him to Dr. Khorram's clinic, the Marianas Eye Institute. Neither Moses nor the clinic inquired about how Moses would pay--he assumed that the same assistance program offered by the hospital to FSM citizens (the MIAP program) would cover him at the private clinic. It didn't. He ended up with a $300+ debt that he couldn't afford.
Attorney Mike White represented MEI in a collection case and Moses stipulated to a judgment. In post-judgment proceedings, MEI agreed with Moses that he had no income or assets from which he could pay. MEI asked the court to order Moses to get a job. Failure to comply with such a court order could result in civil contempt and jail.
Moses had been looking for work already for years, without success. The work situation in the CNMI is difficult, with few jobs and a near-death economy. Despite his efforts, he had not found work.
Moses objected to the order because it was futile, and he would face jail time if he didn't comply exactly with the court's demands. In other cases, we have seen the court continue to increase its demands so that unemployed debtors are required to submit more and more applications every week; and in order to avoid the potential for jail the debtors resort to submitting useless paperwork to businesses who are not even looking for employees. The court also typically requires the debtors to report back in frequent periodic hearings, which clog the docket and often lead judges into the temptation to give tongue-lashings and verbal reprimands simply because of the debtor's continued poverty and unemployment.
The CNMI Supreme Court examined all prior appellate cases in the CNMI and looked at cases from Guam, Illinois, and other jurisdictions. In the end, the court was convinced that the CNMI statute, which allows the court to order "payments," did not expressly authorize the court to order job searches as a means of enforcing ordinary judgment debts.
The CNMI Supreme Court also said that, once the Superior Court found that there were no income or assets from which payment could be made, it could not make any order in aid of judgment.
This small victory will provide enormous relief to many people who are currently in dire economic conditions, without work but owing debt.
Showing posts with label debt collection. Show all posts
Showing posts with label debt collection. Show all posts
Tuesday, February 22, 2011
Tuesday, October 13, 2009
Debt Collection Job Search Orders: A Survey of Jurisdictions
The Marianas Office of Micronesian Legal Services conducted a survey to see if orders to find work in ordinary debt cases (especially consumer debt cases) exist outside of the CNMI.
We sent an e-mail in July and August, 2009 to 163 Legal Services Corporation (LSC) providers nationwide and in Micronesia with a simple poll. LSC's 2008 annual report, indicates that LSC providers nationwide handled 85,605 debt collection and debt relief cases, which accounted for approximately 9.6% of all 2008 LSC cases. Responses from these organizations would be helpful in assessing the existence of job search orders in consumer cases.
Here is the questionnaire we used:
SUMMARY OF RESPONSES red=responded
• To date (October 15, 2009), a total of 51 responses have been received from 37 jurisdictions as follows:
• 15 LSC providers commented on how their jurisdiction does not provide for such authority. 7 out of those 15 providers commented that their state law only allows for either a garnishment or attachment.
• 11 LSC providers commented that orders to find work are found in domestic support enforcement proceedings.
• 8 LSC providers commented on how orders to find work would not pass constitutional muster.
• According to 2 LSC providers in Illinois, orders to find work are rare since the decision Business Service Bureau v. Martin, 715 N.E. 2d 764, 767 (Ill. App. Ct. 1999) was rendered. Occasionally, they see these from vindictive judges in contempt proceedings, where a judgment debtor fails to pay after becoming unemployed.
• Guam Legal Services commented that it has only observed small claims courts using their contempt authority to require judgment debtors to seek employment, but the success of these actions, in all practicality, has been contingent on the debtor’s willingness to become employed.
• South Carolina Legal Services commented that it is one of only a few states that prohibits wage garnishment.
Conclusions: It appears from this empirical data that in fact, the opinion of Professor Vern Countryman, given in testimony before the House Judiciary Committee in 1975, is indeed true.
The only two jurisdictions (besides the CNMI) that seem to have ventured into job search orders in consumer debt cases are Illinois and Guam; and both have issued written court decisions determining that such practices are not authorized by law. See, Business Service Bureau, Inc. vs. Martin, supra, and Zurich Insurance (Guam,)Inc., v. Santos, 2007 Guam 23, 2007 Guam LEXIS 21.
I will keep these results updated. No responses have been received since 9/12/09.
We sent an e-mail in July and August, 2009 to 163 Legal Services Corporation (LSC) providers nationwide and in Micronesia with a simple poll. LSC's 2008 annual report, indicates that LSC providers nationwide handled 85,605 debt collection and debt relief cases, which accounted for approximately 9.6% of all 2008 LSC cases. Responses from these organizations would be helpful in assessing the existence of job search orders in consumer cases.
Here is the questionnaire we used:
| Micronesian Legal Services Corporation (MLSC) is conducting a brief and informal survey of LSC offices and their experience, if any, with court orders to seek employment for the enforcement of judgments on consumer debts. This effort is in response to a recent Commonwealth of the Northern Mariana Islands (CNMI, USA) Supreme Court decision legitimating such orders (2009 MP 7). MLSC is seeking your assistance in forwarding this e-mail to local LSC service providers and staff in order to answer the following three questions: 1. Has your office handled cases involving orders to seek employment to satisfy a consumer debt? If so, in what context? For example, is it in a bankruptcy case? |
Below is a summary of the responses we received.
All LSC providers who have responded say they have no experience with orders to find work pursuant to their judgment enforcement statutes to satisfy a consumer debt. Only 2 jurisdictions have seen such orders in contempt proceedings.
• To date (October 15, 2009), a total of 51 responses have been received from 37 jurisdictions as follows:
• 33 states: Alaska, Arkansas, Arizona, California, Connecticut, Florida, Georgia, Hawaii, Iowa, Indiana, Illinois, Kansas, Kentucky, Massachusetts, Maryland, Michigan, Minnesota, Missouri, Mississippi, Nebraska, New York, North Dakota, New Jersey, New Mexico, Nevada, Ohio, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Virginia.
• 1 U.S. territory: Guam.
• 3 Micronesian political entities: Palau, Kosrae, Yap.
• 15 LSC providers commented on how their jurisdiction does not provide for such authority. 7 out of those 15 providers commented that their state law only allows for either a garnishment or attachment.
• 11 LSC providers commented that orders to find work are found in domestic support enforcement proceedings.
• 8 LSC providers commented on how orders to find work would not pass constitutional muster.
(From Ohio:
"Both the United States and the State of Ohio have constitutional prohibitions against involuntary servitude, which is basically what you are describing. Ohio law prescribes the rights and remedies of creditors. Creditors are limited to garnishing wages or bank accounts, or seizing property or other assets in their efforts to collect debts.")
• According to 2 LSC providers in Illinois, orders to find work are rare since the decision Business Service Bureau v. Martin, 715 N.E. 2d 764, 767 (Ill. App. Ct. 1999) was rendered. Occasionally, they see these from vindictive judges in contempt proceedings, where a judgment debtor fails to pay after becoming unemployed.
• Guam Legal Services commented that it has only observed small claims courts using their contempt authority to require judgment debtors to seek employment, but the success of these actions, in all practicality, has been contingent on the debtor’s willingness to become employed.
• South Carolina Legal Services commented that it is one of only a few states that prohibits wage garnishment.
Conclusions: It appears from this empirical data that in fact, the opinion of Professor Vern Countryman, given in testimony before the House Judiciary Committee in 1975, is indeed true.
Compulsory wage earner plans would be inconsistent with the policy and traditions of a country which has abolished involuntary servitude by the Thirteenth Amendment to its Federal Constitution, has abolished peonage, or debt slavery by federal statute...and has abolished all but a few vestiges of imprisonment for debt by state constitutions and statutes.
Bankruptcy Act Revision: Hearings on H.R. 31 and H.R. 32 before the Subcomm. on Civil And Constitutional Rights of the H. Comm. on the Judiciary, 94th Cong. 347 (1975).
The only two jurisdictions (besides the CNMI) that seem to have ventured into job search orders in consumer debt cases are Illinois and Guam; and both have issued written court decisions determining that such practices are not authorized by law. See, Business Service Bureau, Inc. vs. Martin, supra, and Zurich Insurance (Guam,)Inc., v. Santos, 2007 Guam 23, 2007 Guam LEXIS 21.
I will keep these results updated. No responses have been received since 9/12/09.
Friday, October 9, 2009
Orders to Seek Employment
Our office is challenging a commonly-used debt collection practice in the CNMI. Here, a creditor with a court judgment routinely has the court issue an order requiring an unemployed debtor to find work and periodically produce 10 job applications as proof. Our Supreme Court seems to say that it’s okay. See Bank of Guam v. Ruben, 2008 MP 22, reh’g den., 2009 MP 7.
However, there has been plenty of case law, academic discussion and federal legislative history that uniformly frown upon forcing debtors to work. Although the issue has only come up in the context of bankruptcy, the disfavor is one in the same. Coercing a debtor to toil for the benefit of creditors is a form of involuntary servitude which is prohibited by the 13th Amendment.
In fact, you would be hard-pressed to find job search orders outside the CNMI. We recently conducted a survey of other legal services providers nationwide and throughout Micronesia to see if their jurisdictions entertain such orders. To date, we’ve received 51 responses from 37 jurisdictions. None of the LSC providers have had to deal with orders to find work to pay back consumer debts. Illinois and Guam have seen them on rare occasion, and only in circumstances when a debtor had been in contempt of court. Interestingly, though, Guam's Supreme Court in 2007 held that job search orders are not authorized there (outside of child support cases), and it cited an Illinois case for the same proposition. See Zurich Insurance, Inc. v. Santos, 2007 Guam 23. (My next post will publish the current results of the survey.)
Why do these coercive orders still exist in the CNMI? I'm not sure. They are not expressly authorized by our statutes. Once a judgment is entered, a supplemental hearing may be initiated to determine if there are any assets or income beyond what is needed to cover the reasonable living requirements for debtors and their dependents. If so, they can be forfeited to the creditor. If not, then the inquiry ends. Judgment recovery practices elsewhere are in essence no different. Creditors for the most part are allowed to garnish earnings or attach assets. Debtors are allowed to claim exemptions for basic necessities calculated according to various formulas.
Creditors in the CNMI are given an extraordinary additional tool. They can force debtors to find jobs.
Has this type of coercion existed before? Yes. Compulsory employment to satisfy a debt is a vestige of a bygone era when debtor prisons existed. However, President Jackson outlawed them in 1883 and states eventually followed suit.
The 14th Amendment’s protection of our liberty interests should also be kept in mind. Our evolving modern sensibilities recognize a free and open market for labor and preserve the value of choice in deciding our own livelihood.
Of course, there are no absolute freedoms. There are a multitude of considerations – like family responsibilities or an economic downturn - that force us into one line of work over another. But those pressures are different from legal coercion.
There is one exception: when a parent needs to pay child support. Domestic obligations are given special consideration over consumer debt. The government should be able to step in more aggressively to protect a child’s rights. There is case law on this, and the Bankruptcy Code also reflects this value.
There is no reason why creditors in the CNMI should be given preferences. I’m not aware of any cultural, social or economic relativity argument that would justify ignoring the constitutional prohibition against involuntary servitude. Even from a utilitarian perspective, federal legislative history on bankruptcy points to the futility and impracticality of compelling work to pay back creditors.
An equilibrium between creditor and debtor, lender and borrower, business and consumer, needs to be re-established in order to safeguard 13th and 14th Amendment protections that the low-income stratum of society deserve as much here as anywhere else in the U.S.
(For a more general discussion on debtor rights in the CNMI, see our blog post here.)
Friday, December 19, 2008
Great Day for Debtors' Rights
Today is a great day for judgment debtors in the CNMI.
The CNMI Supreme Court issued a decision in the case of PFC vs. Muna, 2008 MP 21, holding that the Superior Court must honor due process rights in civil contempt proceedings.
Specifically, the Superior Court must do the following in all future civil contempt hearings:
1. Advise the alleged contemnor that he has a right to be represented by counsel.
2. Advise the alleged contemnor that the Court will appoint counsel for him if he is too poor to afford counsel on his own.
3. Continue the matter to allow the non-indigent contemnor the opportunity to get counsel.
4. If a person brought into court on alleged contempt says s/he is too poor to afford counsel and s/he wants court-appointed counsel, the Superior Court is to undertake a quick examination of the contemnor's situation to determine if s/he is presumptively eligible for court-appointed counsel. If s/he is, then the Court appoints counsel before proceeding to the contempt matter.
5. Alternatively, the Superior Court can say before the contempt proceeding begins that it will NOT consider loss of liberty as a possible sanction in the matter. Then there is no court-appointed counsel, but there is also no jail sentence that can be imposed and then left hanging over the head of the judgment debtor as a means to compel payments.
Stay tuned for more information on this matter.
Decision is now available on-line at the Law Revision website: PFC vs. Muna
The CNMI Supreme Court issued a decision in the case of PFC vs. Muna, 2008 MP 21, holding that the Superior Court must honor due process rights in civil contempt proceedings.
Specifically, the Superior Court must do the following in all future civil contempt hearings:
1. Advise the alleged contemnor that he has a right to be represented by counsel.
2. Advise the alleged contemnor that the Court will appoint counsel for him if he is too poor to afford counsel on his own.
3. Continue the matter to allow the non-indigent contemnor the opportunity to get counsel.
4. If a person brought into court on alleged contempt says s/he is too poor to afford counsel and s/he wants court-appointed counsel, the Superior Court is to undertake a quick examination of the contemnor's situation to determine if s/he is presumptively eligible for court-appointed counsel. If s/he is, then the Court appoints counsel before proceeding to the contempt matter.
5. Alternatively, the Superior Court can say before the contempt proceeding begins that it will NOT consider loss of liberty as a possible sanction in the matter. Then there is no court-appointed counsel, but there is also no jail sentence that can be imposed and then left hanging over the head of the judgment debtor as a means to compel payments.
Stay tuned for more information on this matter.
Decision is now available on-line at the Law Revision website: PFC vs. Muna
Thursday, September 13, 2007
3. Debt Collection
We see a lot of people who owe money that they can't afford to pay back. Most times, they don't dispute the debt. They owe the money. The sad fact is, however, they have no money with which to repay the debt. (And by "debt," I mean money owed for goods and services, NOT child support or spousal support.)
We've seen some pretty bad abuses of the debt collection system in the CNMI, too. There is a very strong sentiment that people who owe money MUST pay it back. I have seen the moral and legal obligation to repay money considered more important than supporting children, than buying food, than providing for utilities for one's self, than having transportation, than health needs, than any of the basics of life. And I've seen that attitude from not only collection attorneys and their clients, but from judges.
People who are too poor to pay have been "ordered" to pay anyway, and those orders are under threat of contempt, which can result in jail time. I know of dozens of cases where poor people here in the CNMI were put in jail for not paying their debts, and put in jail without being given an attorney first to help protect their liberty.
MLSC has been relentlessly trying to help poor clients be educated about their rights. We have tried to push the court to follow the law through our representation of indigents in consumer cases. We've had limited success.
So here are a few reminders. This is not an exhaustive list, but it may help people understand the debt collection process, and how it is supposed to work, a little better.
1. When you owe a debt, you can be taken to court for a judgment to be entered against you, and for the court to consider your ability to pay it.
2. When a collection agency like "Reliable Collection" contacts you, you have a right to certain notices. If they call, tell them to stop calling, and keep track of every call, what they say, and what you say. If they write, keep the letters you get. If they threaten you with court action, say "that's a good idea." Because RCA adds on more charges than you typically pay in court. If you are a debtor, collection agencies are not your friends. Don't trust them.
3. DO NOT BE AFRAID OF COURT. You have a chance to have your rights protected in court. If you get papers to go to court, be sure to show up, or you can be arrested.
4. It's a good idea to get legal advice before you go to court. If you are poor, come to Micronesian Legal Services with your court papers (and your collection letters or notes about collection agency contacts).
5. No matter how much you owe, there are some kinds of income that can never be taken from you in payment of the judgment: food stamps, SSI, Social Security benefits, VA benefits, NMI Retirement benefits and income from other similar programs.
6. You also get to protect a certain amount of your income that is necessary for your daily needs.(The federal rule sets this equal to 30 times the federal minimum wage per week). The CNMI law, along with certain federal laws, are designed to keep poor people from going over the edge-mentally, financially. The laws want to help you avoid bankruptcy. The laws want you to be honest, repay your debts within your ability, and support yourself and your family at least to a basic level.
7. But if you are in serious debt and you have some income or asset to protect from the reach of creditors, then you might want to consider bankruptcy relief. This may discharge all of your debts completely, or set up a payment plan for 3 to 5 years and discharge whatever is beyond the plan. Bankruptcy is helpful, but you can only file once every 7 years, and it has a negative effect on your credit rating.
8. If you're thinking about bankruptcy, get a lawyer. There are new rules. You must have credit counseling before you file. And you must meet other requirements that are somewhat tricky.
9. If you have bench warrants out for your arrest, get a lawyer. You don't need to keep hiding. You can do something to get things straightened out and stop worrying.
10. But the best way to avoid running into debt collection problems is to avoid unrealistic debt. Stay away from Friendly Finance, Wells Fargo and Isla Financial Services. These businesses say credit is easy-but it's not. It comes at a very high price and is extremely hard to repay, for anyone. Don't use credit for birthdays, weddings, funerals, baptisms, holy communion or confirmation parties, or anything else like that. Credit is best used for big purchases that you really need and most people aren't going to have enough money for, like houses and cars. Use cash for everything else, and if you don't have cash--don't spend, as hard as it is.
I really admire a lot of my clients who live in poverty. They are strong. They survive without power, telephones, and transportation. Their lives are difficult. But they do what they can and keep trying.
If you're facing tough economic times, please, don't make your life more difficult with bad credit choices.
Good luck.
We've seen some pretty bad abuses of the debt collection system in the CNMI, too. There is a very strong sentiment that people who owe money MUST pay it back. I have seen the moral and legal obligation to repay money considered more important than supporting children, than buying food, than providing for utilities for one's self, than having transportation, than health needs, than any of the basics of life. And I've seen that attitude from not only collection attorneys and their clients, but from judges.
People who are too poor to pay have been "ordered" to pay anyway, and those orders are under threat of contempt, which can result in jail time. I know of dozens of cases where poor people here in the CNMI were put in jail for not paying their debts, and put in jail without being given an attorney first to help protect their liberty.
MLSC has been relentlessly trying to help poor clients be educated about their rights. We have tried to push the court to follow the law through our representation of indigents in consumer cases. We've had limited success.
So here are a few reminders. This is not an exhaustive list, but it may help people understand the debt collection process, and how it is supposed to work, a little better.
1. When you owe a debt, you can be taken to court for a judgment to be entered against you, and for the court to consider your ability to pay it.
2. When a collection agency like "Reliable Collection" contacts you, you have a right to certain notices. If they call, tell them to stop calling, and keep track of every call, what they say, and what you say. If they write, keep the letters you get. If they threaten you with court action, say "that's a good idea." Because RCA adds on more charges than you typically pay in court. If you are a debtor, collection agencies are not your friends. Don't trust them.
3. DO NOT BE AFRAID OF COURT. You have a chance to have your rights protected in court. If you get papers to go to court, be sure to show up, or you can be arrested.
4. It's a good idea to get legal advice before you go to court. If you are poor, come to Micronesian Legal Services with your court papers (and your collection letters or notes about collection agency contacts).
5. No matter how much you owe, there are some kinds of income that can never be taken from you in payment of the judgment: food stamps, SSI, Social Security benefits, VA benefits, NMI Retirement benefits and income from other similar programs.
6. You also get to protect a certain amount of your income that is necessary for your daily needs.(The federal rule sets this equal to 30 times the federal minimum wage per week). The CNMI law, along with certain federal laws, are designed to keep poor people from going over the edge-mentally, financially. The laws want to help you avoid bankruptcy. The laws want you to be honest, repay your debts within your ability, and support yourself and your family at least to a basic level.
7. But if you are in serious debt and you have some income or asset to protect from the reach of creditors, then you might want to consider bankruptcy relief. This may discharge all of your debts completely, or set up a payment plan for 3 to 5 years and discharge whatever is beyond the plan. Bankruptcy is helpful, but you can only file once every 7 years, and it has a negative effect on your credit rating.
8. If you're thinking about bankruptcy, get a lawyer. There are new rules. You must have credit counseling before you file. And you must meet other requirements that are somewhat tricky.
9. If you have bench warrants out for your arrest, get a lawyer. You don't need to keep hiding. You can do something to get things straightened out and stop worrying.
10. But the best way to avoid running into debt collection problems is to avoid unrealistic debt. Stay away from Friendly Finance, Wells Fargo and Isla Financial Services. These businesses say credit is easy-but it's not. It comes at a very high price and is extremely hard to repay, for anyone. Don't use credit for birthdays, weddings, funerals, baptisms, holy communion or confirmation parties, or anything else like that. Credit is best used for big purchases that you really need and most people aren't going to have enough money for, like houses and cars. Use cash for everything else, and if you don't have cash--don't spend, as hard as it is.
I really admire a lot of my clients who live in poverty. They are strong. They survive without power, telephones, and transportation. Their lives are difficult. But they do what they can and keep trying.
If you're facing tough economic times, please, don't make your life more difficult with bad credit choices.
Good luck.
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