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No Fresh Start

No Fresh Start

How States Let Debt Collectors Push Families
into Poverty

The economic downturn has strained millions of families to the breaking point, and the astronomic growth of the debt buyer industry makes them increasingly vulnerable to seizure of essential wages and property to pay their oldest debts. NCLC surveys the exemption laws of the 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands. Sadly, not one jurisdiction's laws meet basic standards so that debtors can continue to work productively to support themselves and their families. 

no-fresh-start-coverReport 
Report (Black/White Printing)
Executive Summary 
Executive Summary (Black/White Printing) 
State Maps and Information 
State Maps and Information (Black/White Printing) 
Press Release
Model Family Financial Protection Act
(model state law)

Related Publications
Attorneys
: - Fair Debt Collection  
                   - Collection Actions  
Consumers
Surviving Debt 

Published: October 10, 2013
©National Consumer Law Center, Inc.

This report builds on NCLC's advocacy, training, publications, and public policy work on fair debt collection to promote family financial well-being. Learn more about NCLC's work.

Overview

States' outdated exemption laws fuel the lucrative and fast-growing debt buyer industry. In 2012, debt buyers purchased (for just a few pennies on the dollar) nearly 90 million consumer accounts with a face value of $143 billion, according to the Federal Trade Commission. Consumers disputed at least one million of these debts, yet only half of the disputed debts were verifiable at all by the debt buyer.

By updating their exemption laws, states can prevent debt buyers from reducing families to poverty. These protections also benefit society at large, by keeping workers in the work force, helping families stay together, and reducing the demand on funds for unemployment compensation and social services.

Key Recommendations

State exemption laws should be reformed to:

arrowPreserve the debtor's ability to work by protecting a working car, work tools and equipment, and money for commuting and other daily work expenses.

arrowProtect the family's housing, necessary household goods, and means of transportation.

arrowProtect a living wage for working debtors that will meet basic needs and maintain a safe, decent standard of living within the community.

arrowProtect at least $1200 in a bank account so that debtors can pay commuting costs as well as upcoming rent and utility bills.

arrowProtect retirees from destitution by restricting creditors' ability to seize retirement funds.

arrowBe automatically updated for inflation.

arrowClose loopholes that enable some lenders (such as payday lenders) to evade exemption laws.

arrowBe self-enforcing to the extent possible so that the debtor does not have to file complicated papers or attend court hearings.


Model Family Financial Protection Act

NCLC has written model language for states to achieve these goals. The model law also includes steps that states can take to reduce the pervasive abuse of the court system by debt buyers.