Bill Restricts Debt Collection Efforts

The state legislature’s Banking Committee held a public hearing Feb. 5 on a bill restricting a creditor’s right to collect overdue debt.

HB 6994 unduly burdens legitimate debt collection in Connecticut and adds to the long list of state and federal exemptions enacted over the years, CBIA’s Louise DiCocco said.

Under current state law, the first $1,000 of a judgment debtor’s wages, if made by readily identifiable direct deposit within 60 days before the bank execution, are automatically exempt from collection.

In addition, current statutes already protect many types of funds in a judgment debtor’s bank account from execution.

These include veterans’ benefits, child support payments, Social Security benefits, Supplemental Security Income benefits, pension benefits, and unemployment compensation payments.

Creditors must fulfill many prerequisites before obtaining a judgment.

And once a creditor secures that judgment, the court enters an installment payment schedule.

As long as the debtor meets the payment schedule, no execution may be done.

The debtor may even go to court to lower the payment.

‘Last Resort’

DiCocco notes that “in collection of debts, Connecticut only allows one active execution per action to be in place at a time.

“If a creditor is collecting pursuant to a wage execution, the court will not issue a bank execution,” she said.

“The reality is that creditors only use bank executions and wage garnishments as a last resort, after a debtor has ignored a court order to make minimal weekly payments on owed debt.”

HB 6994 hurts small businesses looking to get paid for work performed, as well as businesses that rely on bank executions to help them collect legitimate, long overdue debt, she said.

CBIA will continue to oppose and monitor this bill as it makes its way through the legislative process.

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For more information, contact CBIA’s Louise DiCocco 860.244.1169 | @LouiseDiCocco