Having debt can be immensely stressful, particularly for those on a strict budget, where repayment feels impossible. Fortunately, the Consumer Credit Protection Act sets limits on what debt collectors can and cannot take. Moreover, each state should have laws on the topic.
Here are some exemptions from debt collectors under many debtor protection laws:
- Wages: Creditors cannot seize more than a certain percentage of a debtor's wages. The maximum amount is 25% under federal law and in most states of the debtor's disposable income. More exemptions to wage garnishment will be discussed below.
- Necessities: Creditors are not allowed to collect a debtor's food, clothing and other necessities, such as a computer and a television.
- Vehicles: In many states, collectors not allowed to seize and sell a debtor's automobile. If a collector can seize a vehicle, it may nonetheless be protected from being sold if the vehicle is worth below a certain amount (usually $2,000). Finally, a vehicle is usually always protected if it is used in the debtor's business as a tool in their trade.
- Harassment: The debtor is also legally protected from harassment and public embarrassment. Creditors cannot talk about the debtor to others, with the exception of:
- Credit-reporting agencies
- Officials directly involved in collection efforts.
- Violating unfair collection practices laws or harassing a debtor may leave the collector exposed to fines and a lawsuit from the debtor.
Limits on Seizing a Debtor's Wages
As mentioned above, there are federal and state protection laws in place that hinder seizing too much of someone's wages.
Many of these laws are state specific. Generally, the following guidelines apply:
- The wages of workers that have a very low income from their job are exempt from seizing. A wage earner must be left with 30 times the federal minimum wage, which is currently $7.25.This leaves worker with a weekly wage of 217.50. Above this minimum, 25 % of the remaining wages can be seized.
- Minimum wage for the following states: CA = $8, FL = $7.03, IL = $8.25, NY = $8, and TX = $7.25.
- If there is another party seizing a debtor's income, a collector can only seize wages if this party is taking less than 25% of the debtor's disposable income.
- If your debtor needs the money for basic support, they have a right to object to having a collector seizing anything from their paycheck.
- It is not possible to collect from Social Security benefits or a pension. However, if someone has a judgment for child or spousal support, they may be able to seize some money from unemployment insurance, worker's compensation awards, relocations benefits, or disability and health insurance benefits.
If a Debtor Declares Bankruptcy
If someone declares bankruptcy under Chapter 7 of the Federal Bankruptcy Act, a creditor’s right to collect on a court judgment is generally cut off. An exception to this rule is if the creditor obtained the judgment because their property was injured by the defendant's malicious behavior. In this case, the creditor should still have a right to collect judgment despite bankruptcy. The creditor may be required to intervene in the bankruptcy proceeding.
Seeking Legal Advice
If you are a debtor, contacting an experienced consumer protection attorney is the best way to protect your assets. Ignoring legal documents and court summons will not make the problem go away, yet a lawyer may be able to help you find relief. If you are a creditor, it is essential you are aware of the laws protecting the debtor as well as your right to what is owed to you. Hiring an attorney is the best way to ensure your debt is collected quickly and legally.