The assumption held by many is that, once a debtor is found, the creditor can seize or freeze any of the debtor’s assets in order to cover the cost of the debt. That is a false assumption. The Fair Debt Collection Practices Act (FDCPA) is a national regulation that makes certain assets exempt from the credit collections process and protects the consumers from harassment by creditors and debt collectors. Regarding the exemptions, there are four categories of funds that are exempt from garnishment.
Benefits
The benefits that are exempt from debt collection are not the same as the benefits you receive from your employer. The exempt benefits are typically funds received from the government for a specific reason. For example, Veteran’s Assistance benefits, Social Security, Workers’ Compensation, Unemployment and Disability are benefits that cannot be seized in order to pay off outstanding debts. Frequently those benefits actually come from programs the individual or employer has already paid in to, granting them the entitlement to those funds.
Retirement funds
The money set aside for the retirement years is also off limits, provided those funds are secured in either pensions, IRAs, 401k’s or some other retirement savings accounts. Such accounts are inaccessible to creditors seeking payment, even with a judgment against the debtor.
Earned income
The amount of earned income that is exempt from collection depends on a number of factors, including the minimum wage, the debtor’s take home pay, whether or not they receive SSI or PA and the amount of your disposable income. The simplest translation of this exemption is that there is never a time that all income can be garnished to pay off past due accounts. In fact, federal law will allow for wage garnishment only up to 25% of the net income. Like all other garnishments, this requires there to be a judgment against the debtor before taking effect.
Personal property
Like income, certain pieces of personal property are also exempt, rendering it illegal to leave a debtor without any possessions regardless of how much debt has been accrued. For example, one television, one radio, one cell phone and one computer must remain with the debtor. Medical equipment and household goods (furniture, appliances, etc.) are also exempt. Cars can be taken, but only after a certain amount of equity has been paid into the car by the debtor.
The national FDCPA places all of these restrictions on collection agencies. California takes it a step further and applies the law to the original creditors, too. Navigating the various laws and exemptions can be both confusing and tedious. When you sign a debt collection agreement with us, you are enlisting the help of a team of professionals who are familiar with the laws, can ask for necessary judgments to garnish wages and who do so within the parameters of federal and state laws.
It is our desire to represent your company professionally. While we do everything we can to recover your funds, we do so legally and without harassment.
