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California Debt Blog: Bankruptcies Higher In Wage Garnishment States

July 5, 2009 by Jonathan Stein

The Associated Press recently studied trends in bankruptcy filings. One thing stood out to them: in states where debt collectors can garnish wages, bankruptcies are sharply higher.

Five states, North Carolina, Pennsylvania, South Carolina, Florida and Texas, prohibit or sharply limit a creditors right to garnish wages. According to the Associated Press, “The nationwide bankruptcy rate is 42 percent higher than the rate in those five states.”

There is a simple message here: by allowing debt collectors to go after someone’s income, you make it substantially more likely that the debtor will file for bankruptcy. And this helps no one. The debtor does not come out ahead by filing for bankruptcy. The creditor does not get any money from a bankruptcy filing. The court system gets bogged down with more filings.

Maybe it is time for the other 45 states to start looking at North Carolina, Pennsylvania, South Carolina, Florida and Texas to see what they are doing to help avoid bankruptcies.    

Categories: Current Affairs, Legal Process, News Tags: bankruptcy, creditors, debt collector, wage garnishment

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