Legal Collection Limits
Some types of property that the debtor owes are exempt from collection efforts under debtor protection state laws:
- Creditors cannot seize more than a certain percentage of a debtor's wages. The maximum amount is 25% in most states of the debtor's disposable income.
- You are not allowed to collect a debtor's food, clothing and other necessities, such as the TV from his/her living room.
- In many states you're not allowed to seize and sell a debtor's car. The vehicle is protected from being sold if the vehicle is worth below a certain amount (usually $2,000). The vehicle is also protected if it is used in the debtor's business as a tool in his/her trade.
- The debtor is also legally protected from harassment and public embarrassment by you. Don't talk about the debtor to others, with the exception of credit-reporting agencies and officials directly involved in your collection efforts. You don't want to get sued by the debtor.
Limits on Seizing your Debtor's Wages
Protection laws hinder seizing too much of someone's wages:
- Workers that have a very low income from his/her job are exempt from seizing. A wage earner must be left with 30 times the federal minimum wage (5.15$) or the higher minimum wage in certain states. Above this minimum, 25 % can be seized. (Minimum wage: CA= $6.75, FL has no minimum wage law, IL=$5.50 (will be $6.50, 1/1/05), NY=$5.15 and TX=$5.15).
- If there is someone else seizing your debtor's income, you can only seize if this person is taking less than 25% of your debtor's disposable income.
- If your judgment is for spousal or child support you can seize up to 50% of the debtors pay. If your debtor doesn't currently support a spouse or a child, you can seize up to 60 % of his/her wages. There is no automatic protection for low-income workers.
- If your debtor needs the money for basic support he/she has a right to object to you seizing his/her paycheck.
- It is not possible to collect from someone's Social Security or pension. However, if your judgment is for child or spousal support you can seize some money from unemployment insurance, worker's compensation awards, relocations benefits or disability and health insurance benefits.
What Happens if my Debtor Declares Bankruptcy?
If someone you have sued lists you as a creditor and declares bankruptcy under Chapter 7 of the Federal Bankruptcy Act, your right to your court judgment is cut off. An exception to this rule is if you obtained the judgment because you or your property was injured by the defendant's malicious behavior. In this case your right to collect judgment survives the bankruptcy. Sometimes you need to intervene in the bankruptcy proceeding.
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Last Modified: 10-31-2012 03:05 PM PDT