Dear friends,

Over the last several years, the Board and staff of the Community Foundation of Greater Chattanooga have increased our focus on addressing the root causes of persistent poverty and creating new pathways for upward economic mobility.

This work was prompted by a variety of troubling reports that indicated how sharply upward mobility was being limited, as well as the first-hand feedback we were receiving from our many valued nonprofit partners. Simply put, we found that for many families in the communities we serve, there simply were no viable mobility pathways – no way to get ahead. If you are a Chattanoogan born into poverty, there is a high degree of probability that you will live in poverty for your entire life.

The burden of household debt – where it comes from and how it is managed – became especially interesting to us once we began to realize exactly how much debt was being carried by so many local families who are already economically fragile. Could debt collection itself be creating additional harms and complications for Chattanoogans? What might be done within the bounds of the law to change these outcomes?

Last year, the Community Foundation of Greater Chattanooga entered into a partnership with The Pew Charitable Trusts and our local General Sessions Court to have a look at the civil court debt collection process and its impact on our community. The results of our research are contained in this report.

We entered into this work because we believe in helping people in our community who work hard but still struggle to get ahead. People like Pam (her name has been changed to protect her identity).

Pam has a good job where she makes $15.50 per hour. Years ago, however, she incurred some medical debt that she has never been able to pay. A debt buyer acquired the debt from the original creditor and sued Pam. Because of her work schedule, she could not make her court appearance, and the judge had no choice but to side with the collector. Now her employer is garnishing 25% of every paycheck.

Pam filed a motion with the court to pay the debt in installments. Fewer than 5% of consumers file to pay their debt in installments like Pam and get the protections that Tennessee’s law provides. When the creditor failed to show up in court, the judge granted her motion, and Pam immediately went to the clerk's office to have her garnishment released.

Unfortunately, the garnishment could not be released until Pam's outstanding court costs were paid. While her employer had been garnishing her wages, they hadn’t yet turned over those wages to the court. The court costs can only be satisfied once the court has gotten that money – and only then will the garnishments stop.

On top of that, the garnishment department at her workplace does not have phones. She can only contact them by email or fax machine.

Pam is committed to paying her debts and willing to work hard to get it done. Even so, she’s spending enormous amounts of time getting referred from one office to the next, unable to explain her situation to her employer or find out what has happened to the money that has already been taken out of her paycheck. She’s trying to do the right thing but she can’t get help anywhere.

As a result, she’s stuck with only bad options. Forgo her rent to pay court costs? Go into debt with someone else to cover her rent? Risk eviction? Give up entirely?

What would you do?

We are dedicated to removing barriers to economic mobility and creating opportunities for every family’s stability and well-being. Court-enforced debt is an invisible but crushing weight for many families; in many cases, a family’s biggest expense. Pam’s story is true and all too common. She represents hundreds and hundreds of Hamilton County residents who are struggling in similar predicaments.

Over a year, we had the opportunity to speak with dozens of community members whose work intersects with this issue. One local pastor told us, “We see this every day. I probably get more calls about [evictions and garnishment] than spiritual questions.” While many people will of course turn to their faith leaders in times of crisis, it is revealing that often people will do so because they have no idea where else to turn or what resources may be available to them.

The burden that the current system places on our local businesses is enormous as well. During this research, we spoke to numerous employers. They all shared that garnishing their workers’ wages or clients’ bank accounts cost them a great deal in time and effort, to say nothing of the legal exposure that they incur or the damage done to their relationships with their employees or clients.

While this document represents the end of one phase of our work, we believe that it is only the beginning of a dialogue that will take many shapes and lead to positive outcomes in the years ahead. Hamilton County’s court system has a track record of innovation, collaboration, and problem-solving. We hope our work on debt collections follows in that tradition.

As one local pastor reminded us: “Hope is in the court.” Indeed, so long as our state and local policies are aligned with our promise to the families we serve, we can keep building a community that is fair, just, and strong.

On their behalf and ours, thank you.