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Report: Michigan debt crisis falls hardest on low-income families

Wikipedia Media Commons

A new report from acommission convened by the Michigan Supreme Court calls for better ways to help people manage their debt before their cases wind up in the legal system.

TheJustice For All Commission report says almost everyone’s a loser in debt collection cases that are flooding district courts. Debtors amass interest and court costs and most have their wages garnished on liabilities they may not even know about. Landlords, retailers and others who are owed money don’t recover all their losses.

The report says the majority of collection cases are filed in low-income, minority neighborhoods.

“Debt collection claims are dominating district court dockets,” said Kathryn Hennessey with the National Center for State Courts and a commission co-chair. “Aside from traffic cases, in 2019 debt collection cases had the highest volume of any civil or criminal case type, representing 37 percent of all cases filed in Michigan’s district courts.”

Erika Rickard is with the Pew Charitable Trusts, which helped fund the study. She said debt judgements can be sold and resold to professional debt collectors while the person who owes the money may have never received a notice there’s a court action.

“Court judgments carry significant costs that can become larger than the original amount of the debt,” she said. “Most debt cases in Michigan end in a garnishment, which is where plaintiffs armed with a court judgment can seize a debtor’s assets, wages or state tax returns based on a case that they might not even know about.”

Angela Tripp with the Michigan Poverty Law Programsaid there’s a lot to be done to make the process for resolving overdue debt more transparent and easier to navigate.

“These recommendations are not the end of the road for this work,” she said. “They are really the start of the journey, and now it’s time to put these recommendations into action.”

That means new court rules and forms that are easier to understand. And some new laws adopted by the Legislature might also be needed.

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Rick Pluta is the managing editor for the Michigan Public Radio Network.
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