ALBUQUERQUE – With millions of families struggling to find financial stability as soaring inflation drives up the costs of basic necessities, our state legislature plays a vital role in protecting New Mexico households from seizure of essential wages and property to pay old debts. But according to a new report from the National Consumer Law Center (NCLC), New Mexico has mediocre protections in place, at best, and falls woefully short of protecting debtors’ wages and homes.
“Everyone should have access to basic needs while paying down debts.” said Wolf Bomgardner, economic equity attorney at the New Mexico Center on Law and Poverty. “This means that families facing bankruptcy or debt collection must be able to retain enough to have a home and livelihood. We need to modernize New Mexico law to protect the fair value of property.”
The No Fresh Start report grades each state on its exemption laws, which protect income and property from seizure by creditors, debt buyers, and the debt collectors they hire. New Mexico law preserves just $290 a month in wages for a person supporting two children and working full-time at minimum wage and protects just 28% of the median home value in the state. New Mexico received an A for protections of household goods, protecting all furniture, among other household necessities, but failed to meet four of the five basic standards analyzed in the report:
- Preventing creditors from seizing so much of the debtor’s wages that the debtor is pushed below a living wage – D
- Allowing the debtor to keep a used car of at least average value – C
- Preserving the family’s home—at least a median-value home – D
- 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 – C
- Preventing seizure and sale of the debtor’s necessary household goods – A
“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.”
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. Exemption laws place limits on these seizures.
Without continued improvement to 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. Reform of exemption laws not only protects families from destitution but can also act as an economic stimulus tool that steers money into state and local communities.
The New Mexico Legislature is currently considering a bill sponsored by Senator Bill O’Neill and Representative Gail Chasey that would increase protections for people in debt collection. Senate Bill 216 would increase the value of property exempt from debt collection, including the average value of a used car, median value home, and automatically exempt a basic amount in a bank account. The bill would also protect the highest applicable minimum wage from garnishment.
For more information on NCLC’s work related to fair debt collection, visit nclc.org/topic/debt-collection
The New Mexico Center on Law and Poverty is a nonprofit that works with low-income New Mexicans to improve living conditions, increase opportunities, and protect the rights of people living in poverty.