November 1, 2021 — Report

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. Exemption 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 particularly important as families struggle to regain financial stability as pandemic protections expire. 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 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.

This report details the extent to which states protect families in each of these five areas.

Best states: Massachusetts, which modernized its archaic exemption laws in 2010, and Nevada, which also recently improved its laws, come closest to meeting these five basic standards, each rating a high B grade. Solid B states include California, Connecticut, the District of Columbia, Maine, Puerto Rico, and Texas, while New York, Oklahoma, and South Carolina rate low 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, Kentucky, Michigan, New Jersey, and Utah are the worst and rate an F. Meanwhile, Arkansas, Indiana, Pennsylvania, and Wyoming are nearly as bad, rating low D grades.

During the past twelve months, several states amended their laws to make improvements in these protections. Arizona, Connecticut, Maine, Montana, Virginia, and Washington made particularly significant improvements, and Georgia, Idaho, New York, Tennessee, and Utah also made positive changes. See Several States Made Progress for details.