2025 OVERALL RATINGS: The Strength of State Protections for Family Finances
A –Has strong protections in all five categories (no states)
B –Has strong protections in most categories (5 states & Puerto Rico)
C –Has many gaps and weaknesses (17 states & the District of Columbia)
D –Has weak protections (19 states & the Virgin Islands)
F –Has extremely weak protections (9 states)
State exemption laws, which protect income and property from seizure by creditors, debt buyers, and the debt collectors they hire, are a fundamental safeguard for families. These laws are designed to protect consumers and their families from poverty and to preserve their ability to be productive members of society and achieve financial rehabilitation.
These protections are critically important today. Families are reeling from the impact of historically high inflation on their budgets, especially rising rent and food costs, and are facing a surge in debt collection lawsuits.
Exemption laws protect cars, work tools, and other property that consumers need to stay in the workforce. When individuals lose their jobs, the consequences fall not just on them and their families, but also on landlords, local merchants, and other creditors that the consumer might have paid.
Exemption laws provide a floor for economic stability. Yet 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 close to 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 are not cleaned out; and
- Preventing seizure and sale of the debtor’s necessary household goods.
Best States
While no states achieve an ‘A’ grade for 2025, Arizona, California, Massachusetts, New Mexico, Puerto Rico, and Texas achieve ‘B’ grades.
Worst States
At the opposite end of the scale 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. Georgia, Indiana, Kentucky, Michigan, Mississippi, Missouri, New Jersey, Utah, and Wyoming have long been the worst states, garnering ‘F’ grades. In Michigan, both the House and Senate passed a bill in 2024 that would have improved its laws enough to remove the state from this list, but the House failed to send it to the Governor for signature—a question now before the state supreme court.
Key Recommendations
State exemption laws should:
- Protect a living wage—at least $1,000 per week, but more in high-cost states—for working debtors, including those paid as independent contractors, so that families can meet basic needs and maintain a safe, decent standard of living within the community.
- Automatically protect a reasonable amount of money on deposit so that debtors have a cushion to cover several months of basic needs such as rent, daycare, utility bills, and commuting expenses.
- Preserve the debtor’s ability to work, by protecting a working car, work tools, and work equipment.
- Protect the family’s housing and necessary household goods.
- Protect retirees from destitution by restricting creditors’ ability to seize retirement funds.
- Automatically update exemption laws for inflation.
- Close loopholes that enable some lenders to evade exemption laws. For example, states that allow lenders to take household goods as collateral enable these lenders to avoid state protections of household goods.
- Be self-enforcing to the extent possible, so that the debtor does not have to file complicated papers or attend court hearings.
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