The National Consumer Law Center has issued a report looking at state exemption laws related to how much can be protected from garnishment and developed a model bill for states to use that would increase consumer protections in this area.
The report looks at how much can be seized and determined that “not one jurisdiction” meets the “basic standards so that debtors can continue to work productively to support themselves and their families.”
For example, according to the report, individuals in Pennsylvania have very few exemptions from having personal property seized. They are allowed to keep clothing, a Bible, school books, sewing machines not held for resale, military uniforms and $300 of other property, according to the report. In Michigan, which received a “F” grade from the NCLC, five swine, two cows, and five roosters are protected from seizure, while also protecting only $3,500 for a family home — which represents about 2% of the median value of a home in the state.
“It’s a travesty when outdated state laws protect sewing machines and roosters but not a living wage, a working car, and a bare bones checking account,” said Carolyn Carter, a deputy director at the NCLC and author of the report, in a statement. “This report serves as a wake-up call for states to update their exempt property laws and stop putting millions of families at risk. Doing so will allow local courts to redirect their focus from the insatiable appetite of a debt machine that churns out millions of undocumented debt collection lawsuits each year.”
The NCLC laid out five criteria that it defined as a “basic standard”:
- Preventing debt collectors 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 at least $3,000 in a bank account so that the debtor has minimal funds to pay such essential costs as rent, utilities, and commuting expenses, and
- Preventing seizure and sale of the debtor’s necessary household goods.
That is where the NCLC’s model state legislation comes in. The language of the “Family Financial Protection Act” would bolster consumer protections related to garnishment and property exemptions while also including “steps that states can take to reduce the pervasive abuse of the court system by debt buyers.”
