Courts set rules for debt collection in the event of a pandemic



SANTA FE – New Mexico court system takes action to ease financial turmoil as state braces for wave of foreclosures on delinquent mortgages and state phased out moratorium on collection orders trade receivables often related to credit cards or health care.

The Courts Administration Office on Aug. 2 announced staggered deadlines for a return to debt collection orders that can be used to garnish wages or seize property to pay off trade debts. Common forms of bad credit are related to credit card spending and medical bills.

Lindsay Cutler, an attorney on economic equity issues for the New Mexico Center on Law and Poverty, said thousands of debt collection cases are likely on hold under the state’s moratorium – protecting Critical federal pandemic relief efforts aimed at supporting household income and spending.

Cutler said money from standard and supplemental unemployment benefit payments will remain exempt from trade debt collections – although it is up to unemployment recipients to identify those funds as exempt.

At the same time, the state judiciary said mortgage lenders would not be allowed to foreclose on properties without first providing homeowners with information on the various ways to avoid foreclosure, including agreements to foreclose on property. ‘forbearances that temporarily reduce or suspend loan payments.

Supreme Court Chief Justice Michael E. Vigil has acknowledged that an increase in foreclosure and consumer debt cases is expected as pandemic protections begin to expire – but he noted that he the situation is unlikely to be overwhelming.

“We have reached a point in the COVID-19 pandemic where courts can normally handle consumer debt cases and foreclosures in a fair and orderly manner,” Vigil said in a statement.

A statewide moratorium remains in place on evictions indefinitely for people unable to pay their rent and a new national moratorium on most evictions was released by the Centers for Disease Control and Prevention on Tuesday. It is expected to last until October 3.

The US government lifted an order that prevented banks across the country from foreclosing on homes, potentially putting thousands of families at risk.

According to the Mortgage Bankers Association, about 1.75 million homeowners – about 3.5% of all homes – have some sort of forbearance plan with their banks. It is not known how many New Mexico homeowners are forborne.

The magnitude of the potential problem is much smaller than it was during the Great Recession, when around 10 million homeowners lost their homes following the bursting of the housing bubble in 2008.

A limited number of single-family home owners in the United States still fall under an eviction moratorium that was extended until September 30 by the Federal Housing Administration.

Federal agencies will continue to require mortgage agents to give borrowers who can resume their payments the option of moving missed payments until their mortgage expires at no additional cost.

For past due consumer debt, commercial lenders can begin filing collection orders in New Mexico courts over time, starting September 1 for judgments dating back to 2016 or earlier. The moratorium expires completely on February 1, 2022.

Cutler said people with impending consumer debts should open court documents when they arrive in the mail to check for inaccurate claims to guard against predatory debt collections.

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