This report surveys the exemption laws of the 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands and finds that not one jurisdiction meets five basic standards.
Every state has a set of exemption laws, intended to prevent creditors from pushing consumers and their families into destitution. Exemption laws preserve basic items of property from seizure by creditors so that consumers can to continue to work productively and support themselves and their families. These laws are intended to protect at least subsistence wages and essential property, such as a car and home, from seizure by creditors.
States have good reason to be concerned about protecting their residents from overaggressive collection of judgments for consumer debts. The growing wealth gap strains families to the breaking point and the growth of the debt buyer industry makes them increasingly vulnerable to seizure of essential wages and property.
This report surveys the exemption laws of the 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands. Despite the importance of state exemption laws, this report finds that not one jurisdiction meets five basic standards:
- 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.
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 Texas, Puerto Rico, and
the District of Columbia. New York, Oklahoma, and South Carolina rate low “B” grades.
Kansas, North Dakota, and Wisconsin each rated a high “C.”
Worst states: At the opposite end of the scale are several states whose exemption laws
reflect indifference to struggling debtors. These states allow debt collectors 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, Alabama, Arkansas, Indiana, Maryland, Missouri, Pennsylvania, and Wyoming are nearly as bad, rating a “D-.”