The New York Times recently reported more shady swindling on the part of banks and creditors: they’re garnishing wages from delinquent borrowers.

"One of the worst economic downturns of modern history has produced a big increase in the number of delinquent borrowers, and creditors are suing them by the millions. Concern is mounting in government and among consumer advocates that the debtors are not always getting a fair shake in these cases."

Those hardest hit may be low income and communities of color. Folks of color have already been hit hardest by the recession, and are often saddled with subprime loans and higher interest rates. According to the Consumer’s Union, low income folks and families of color are less likely than whites to have credit cards in the first place, they’re more likely to carry over balances and pay higher interest rates. 84 percent of Blacks and 75 percent of Latino credit card holders have current balances, compared to only 51 percent of whites. A recent Gallup poll uncovered that low income families pay significantly higher portions of their incomes toward credit card debt. Low-income families with credit cards who earn less than $20,000 pay an average of 14 percent of their total income toward debt, while higher income families that earn over $100,000 only owe 2.3 percent of their incomes. Given these sobering numbers, it’s easy to see how people fall behind on monthly payments. Yet by the time banks or creditors take them to court, most borrowers are too confused or intimidated to fight back. As federal law currently stands, only $217.50 a week is exempt from seizure. Which presumably means that anyone making more than that could be in for serious trouble. And the working poor could fare even worse. After late fees, compounded interest, and the bank’s lawyer’s costs, the amount of wages garnished is often much higher than the original debt. Regional statistics paint a bleak picture: pay seizures up an astonishing 121 percent in Phoenix since 2005 and 55 percent in Atlanta since 2004. In Cleveland, they shot up 30 percent in the year between 2008 and 2009. On top of everything, it’s getting harder to file for bankruptcy. The Times article also points out:

Bankruptcy can clear away most debts. Yet sweeping changes to federal law in 2005 — pushed by the banking lobby — complicated that process and more than doubled the average cost of filing, to more than $2,000. Many low-income debtors must save for months before they can afford to go broke.

According to an article in last year’s Albany Law Review, the 2005 Bankruptcy Code amendment also but made it much more difficult for borrowers to file for Chapter 7 bankruptcy, which offers an almost automatic cancellation of debts. Many borrowers of color are forced to file for Chapter 13 bankruptcy, which requires debtors to make payments over the period of several years and has only a 23 percent overall relief rate. Folks of color often fare significantly worse in Chapter 13 bankruptcy than their white counterparts; the discharge rate for Blacks and Latinos is 40 percent lower than the rate for whites, even after controlling for variables like income, education, and employment. But here’s the catch: Many people who fight back against their banks or creditors actually stand a decent chance at winning. That’s because most creditors often lack documentation to prove their claims since the loans usually belong to debt collectors, not banks themselves. All this sound a little too familiar? We want to hear your story, especially if you’ve been harassed or taken to court by your bank. Drop a line in the comments.