BOSTON – A new report from the National Consumer Law Center (NCLC) grades each state on its exemption laws related to protecting households from seizure of wages and property to pay old debts.
Those laws are designed to protect income and property from seizure by creditors, debt buyers, and the debt collectors they hire.
“In states with weak exemption laws, working families are at risk of falling deeper into financial peril if their wages and bank accounts can be seized as they struggle to pay for heat, food, and other necessities,” said Michael Best, staff attorney at the National Consumer Law Center. “Weak protections for the income and assets that families need imperil their health and safety, push them deeper into poverty, and can widen the racial wealth gap.”
Five Standards
According to the NCLC, its annual survey of exemption law in the 50 states, District of Columbia, Puerto Rico, and the Virgin Islands finds that not one jurisdiction meets five basic standards:
- Preventing creditors from seizing so much of the debtor’s wages that the debtor is pushed below a living wage
- Allowing the debtor to keep a used car of at least average value
- Preserving the family’s home—at least a median-value home
- Preserving a basic amount in a bank account so that the debtor’s funds to pay essential costs such as rent, utilities, and commuting expenses and to weather income and expense shocks are not cleaned out
- Preventing seizure and sale of the debtor’s necessary household goods.
How States Rated
According to the NCLC ratings:
Better States: Arizona went from a D in last year’s report to the highest grade in the nation with an A this year, the organization said. “An Arizona ballot initiative increased a wide array of protections, from wage and bank account seizure to the family home and household goods, but the state still falls short of protecting a living wage,” according to the NCLC.
The NCLC said Massachusetts, which modernized its archaic exemption laws in 2010, and Nevada, which also recently improved its laws, come next closest to meeting these five basic standards, each rating a high B grade.
Solid B States
Solid B states in the NCLC ratings include Connecticut, the District of Columbia, Maine, Puerto Rico, and Texas, while California, New York, Oklahoma, and South Carolina rate low B grades.
Worst States
At the opposite end of the scale, according to the NCLC, are several states whose exemption laws reflect indifference to struggling debtors. “These states allow creditors—or the debt collectors they hire--to seize nearly everything a debtor owns, even the minimal items necessary for the debtor to continue working and providing for a family,” the NCLC said.
The organization called Georgia, Kentucky, Michigan, New Jersey, and Utah the worst and said rate an F. Meanwhile, Arkansas, Pennsylvania, and Wyoming are nearly as bad, rating low D grades.
Significant Improvement
According to the NCLC, states that made significant improvements since NCLC’s 2021 report a year ago include Arizona, California, and Colorado, which made “particularly significant improvements.”
Reason for Laws
“State exemption laws are a fundamental protection for families. Without these laws, once a creditor obtains a ruling from a court that a consumer owes it a sum of money, the creditor can seize the debtor’s entire paycheck, bank account, car, and household goods, and sell the debtor’s home,” the NCLC said. “Exemption laws place limits on these seizures. Without improved exemption laws, seizures by debt collectors drain away the wages and resources that families need—and that the local economy needs them to be spending at Main Street businesses.”
Still Free in ’23! The Freshest CU Headlines. Right to Your Inbox.
The biggest, best and freshest news reporting in credit unions remains free in ’23! Each morning CUToday.info delivers its daily update offering the latest headlines and breaking news right to your email, with the easy-to-read headlines format allowing you to click on the stories that interest you most in order to learn more.
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties, and we will not be contacting you to sell you an extended warranty or sending you any links so you may cash in on an inheritance you didn’t know was coming.
And did we mention it’s free?
Please note and/or make your IT department or email administrator aware the emails will be coming from the domains CUTodayinfo.com and CUTodayinfoReply.com.