Jun 12, 2013

I am really confused today. I’ve had a major collision with reality.

The thought of banks withdrawing money out of personal bank accounts to pay down a government debt drives me completely crazy. This, ladies and gentlemen, is a very bold step in the collection of debts. Garnisheeing a person’s bank account without due process or without some type of legally binding contract is shocking. This is what has happened in Cyprus.

Now, they have disguised the debt collection aspect by calling it a tax or levy on bank deposits. The tax (levy) is among conditions demanded by creditors for Cyprus to get $10 billion (US$ 13 billion) in bailout funds.

This tax (levy/offset/garnishment) on ordinary citizens’ savings is an unprecedented step in Europe’s 3 ½ year-old debt crisis and threatens the principles of private property in a liberal democracy. (6.75% on accounts of up to $ 100,000 – US $131,000 and 9.9% on accounts over $131,000.)

Fortunately, the world has reacted in a similar way as me, and, in response, the Cyprus government has delayed implementation of the attachment of it’s citizens’ private funds that have been deposited into a bank.

Of course, the first response for the panicked citizens was to withdraw all of their money out of the financial institutions. Does this not sound a bit like our great grandparents who feared banks and often hid their money in their mattresses or under the bed?

Many questions race to the front of the line with all of this. How can a creditor bypass the courts and use parliaments to collect debts? Normally, if you want to attach or garnishee a debtor’s bank account you must commence a legal proceeding and give the debtor notice of the legal proceeding. The debtor then has the right to their day in court – to dispute the debt (the debt just might not be owing) to dispute the amount of the debt or advise the court of any other relevant factors that are involved in the litigation.

How is it possible to transform a nation of citizens into one universal debtor? And then expose their assets to mass execution – kind of sounds like a script from Edgar Allan Poe, doesn’t it. Then you wake up screaming to find out it’s real…

This action by creditors against debtors reveals a growing contempt for debtors that existed back in the days when debtor’s prisons existed. It’s been happening at a much more microcosmic level in Canada since the mid 1990s after 35 years of progress with a long list of civil rights and a major overhaul of the Canadian Bankruptcy Act in 1992.

Included in this march for fairness between debtors and creditors have been the seize or sue provisions and the 2/3rds principle with the Personal Property and Security legislation, modernized exemptions legislation in most provinces that allow debtors to keep a part of their home equity, car equity, a specified amount for household goods and necessary tools of the trade. The process of attachment of a debtor’s property or bank account has been a legal process where 70% of a person’s wages are normally protected. Only certain debts like income tax arrears and family maintenance arrears are able to go directly to the debtor’s wages or bank account.

Although good intentions may have spirited the agreement between the debtor country Cyprus and its creditors, the imbalance between a desperate insolvent debtor and aggressive collection pressure by powerful creditors no doubt played a role in stripping individuals and families of their indefeasible rights to their cash-money, often wages or pensions, held in trust in a financial institution. Rights that have been successfully won since the dark ages of debtor’s prisons and a bankruptcy process designed to repossess all of the debtor’s assets.