VA’s Lawmakers Can Improve the Legal Process for Collecting Debt

This session of Virginia’s General Assembly brings opportunities for lawmakers to pave a path to resolution for the 139,703 Virginians being sued over consumer debt in 2023 alone.

In fact, about 20% of Virginians have overdue credit lines or unpaid bills that creditors are trying to collect.  VPLC urges lawmakers to consider effective and equitable reforms to improve the legal process for defendants, plaintiffs, and the courts

Too often, Virginia consumers involved in litigation are dealing with inadequate information, confusing processes, and outdated, ineffective policies that do little to help them address their debts.

Better policies around these lawsuits can help alleviate some of those issues, and policymakers have both the ability and the authority to implement simple, straight-forward solutions to improve how debt cases play out in court.

Here are some examples of key policies supported by Virginia lawmakers:

HB 1864 (Delegate Hernandez)  automatically protects someone’s bank account from being “frozen” by the garnishment of a debt collector.  This simple solution makes the process easier for banks and credit unions, creditors and the courts.  Most importantly, the owner of the account will not be required to go to court and claim their funds that should never have been frozen in the first place.  As the Pew report points out, most people will face so many obstacles with getting to court and pleading their case that they will lose all the funds in the account and be placed into a situation where they are unable to pay rent, buy food or access medicine.

HB 1725 (Delegate Delaney) is named the Medical Debt Protection Act.  In 2024, the General Assembly passed bipartisan legislation, supported by VPLC to prohibit credit reporting for medical debt.  HB 1725 offers further protections that ensure:  that patients won’t be charged interest or late fees on medical debt, will have access to affordable payment plans and protection for core financial assets, including a patient’s home.

HB1610 (Delegate Cole) establishes a 7-year time limit for a state agency to collect a debt.  Imagine getting a letter demanding payment of a 15-year-old debt that you have long forgotten.  This bill is also important because it does not require someone to go to court to get the benefit of this time limit (often referred to as a statute of limitation).

HB1979 and HB 2284 (Delegate Hernandez and Delegate Coyne) have bills introduced to stop the state from taking 100% of a person’s wages to pay a tax debt.  Imagine what happens to a person who learns that all of their paycheck has been taken and they have no income.   These bills restrict a garnishment to 25% of a person’s wages, just like all other creditors.

The Pew Research Center report Simple Solutions Can Help States Better Handle Debt Cases  illustrates that state lawmakers around the country can advance reforms with simple, straightforward solutions to improve how debt cases play out in court.

From Pew Research: Understanding Who is Being Sued in Virginia