Understanding Collection Laws & Exemptions

Collection Laws & Exemptions
Aly J. YaleMay 3, 2022
Key Takeaways:
  • Find out your state's consumer debt protection laws and exemptions.
  • Review FDCPA rules and collection exemptions for homesteads, autos, bank accounts, and wages.
  • Find links to learn more about your state's rules.

Collection laws protect you from being harassed by bill collectors and debt collection agencies, and they also stipulate how, when, and where collectors can contact you. 

Do you have debts that have gone to collections? Here’s what you need to know about these laws for collection agencies — and how to take action if a collector violates them.

U.S. debt collection laws

There are several laws for collection agencies in the U.S. The main one is the Fair Debt Collection Practices Act. There is also the Fair Credit Reporting Act and numerous state debt collection laws. 

Here’s a little more about each — and what they protect you from as a consumer. 

Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA) provides the most protection. According to U.S. legal code, it is a response to “abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors.” It also says, “Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.”

The FDCPA provides several protections for consumers against bill collectors and debt collection agencies, including:

  • Limiting how and when collectors can contact you: Under the FDCPA, bill collectors can’t contact you before 8 a.m. or after 9 p.m. or at a time they know is inconvenient for you. They also cannot contact you at work if your employer doesn’t allow it, nor can they contact you more than seven times within a seven-day period. Finally, if you do speak to them by phone, they can’t reach out for at least another seven days after that.
  • Outlawing harassment and abuse by debt collectors: A debt collector can’t harass or abuse you when seeking repayment. What constitutes harassment or abuse? According to the Federal Trade Commission, threats, profane language, repetitious phone calls intended to annoy you, and publicly revealing your debts are just a few examples. Bill collectors also can't lie or misrepresent themselves as an attorney or someone from the government.
  • Giving you the right to have an attorney as your intermediary: If you hire legal representation, debt collection agencies must go through your attorney for all communication. They cannot contact you directly once they know you have hired a lawyer.

The FDCPA only applies to personal, family, and household debts. Business debts do not fall under this particular law's protections.

Fair Credit Reporting Act

The Fair Credit Reporting Act is another federal law that protects consumers. This one dictates what and how debt collection agencies and bill collectors can report your financial information to the three main credit bureaus (Experian, TransUnion, and Equifax). 

While this law doesn't directly pertain to collections attempts against you, it does prevent creditors from reporting inaccurate information to bureaus, which could hurt your credit score and long-term financial opportunities). It also requires them to maintain good records of your debts and that they notify credit bureaus if you're disputing a debt (which we’ll go into later on).

State Laws for Collection Agencies

Many states also have their own laws governing debt collection practices or ones pertaining to unfair and deceptive acts, which also may provide additional protection. To find out if there are such laws in your state, contact your state attorney general’s office or consult a local legal professional.

Collection Laws & Exemptions
FDCPA Applies to Original CreditorsHomestead ExemptionVehicle ExemptionBank AccountWages
Alabama$5,000 (can double)None$3,00075%
Alaska$70,200$3,900$1,820 or $2,860$456-7161
Arizona$150,000$5,000$15075%
ArkansasUnlimited (<1/4 acre)$1,200$800 or $125075%
CaliforniaYes$50,0004$5,000 (2x)$075%
Colorado$30,000$5,000None75%
Connecticut$75,000 (2x if married)$1,500$1,00075%
DelawareNone (if both owe $)None$50085%5
D.C.YesUnlimited$2,575$85075%
FloridaYesUnlimited$1,000None100%2
Georgia$10,000 (can double)$3,500 (2x)$60075%
HawaiiYes$30,000$2,575None80%
Idaho$50,000$5,000$80075%
Illinois$15,000 (can double)$1,200$2,00085%6
Indiana$7500 (can double)None$4,00075%
IowaYesUnlimited$5,000$10075%3
KansasUnlimited$20,000None75%
Kentucky$5,000$2,500$1,00075%
Louisiana$25,000NoneNone75%
Maine$25,000 (ask)$5,000$40075%
MarylandYesNone (if both owe $)$5,000$6,00075%
MassachusettsYes$300,000$700$42575%
MichiganYes$35,300 or $52,925 if elderly or disabled$3,250None75%
Minnesota$200,000$3,600None75%
Mississippi$75,000$10,000None75%
Missouri$8,000$1,000$1,25075%
Montana$60,000$2,500None75%
Nebraska$12,500$2,500 wildcard85%
Nevada$125,000$4,500None75%
New HampshireYes$30,000$4,000$8,00075%
New JerseyNone (if both owe $)$1,000$1,00090%7
New MexicoYes$30,000 (may double)$4,000$2,00075%
New YorkYesVaries by county See CVP § 5206$4,000$2,500890%
North CarolinaYes$10,000 (may double)$1,500$500100%
North Dakota$80,000$1,200$7,50075%
Ohio$25,000$3,225$425 (2x)75%
OklahomaUnlimited$3,000None75%
OregonYes$25,000 ($30K couple)$1,700 (2x)$40075%
PennsylvaniaYesNone (if both owe $)None$300100%
Rhode Island$150,000$12,000None75%
South CarolinaYes$50,000 (can double)$5,000$5,000100%
South DakotaUnlimited$6,0006k-Auto75%
Tennessee$5,000 ($7.5K cpl)$4,000 wildcard975%
TexasYesUnlimitedUnlimitedNone100%
Utah$20,000 (can double)$2,500 or $3,500None75%
VermontYes$75,000 (can double)$2,500$1,10075%
Virginia$5,000 (+$500/kid 2x)$2,000None75%
Washington$40,000$2,500$50075%
West VirginiaYes$25,000 (can double)$2,400$800+75%
WisconsinYes$40,000$1,200+$1,00075%
Wyoming$10,000 (can double)$2,400None75%
Notes1. Alaska: $716/wk (head of family) or $456/wk (non-head of family) 2. Florida: 100% (head of family only) or 75% for non-head of household 3. Iowa: 75%, but yearly total limited 4. California: $50k (single), $75k (married), $125K (65 or disabled) 5. Delaware: 85% of disposable 6. Illinois: 85% of gross 7. New Jersey: 90% of gross, unless judgment-debtor earns more that 250% of federal poverty level, then court has discretion to use federal 25% exemption. 8. New York: Account contains directly deposited exempt benefits, including Social Security, SSI, Veterans benefits, disability, pensions, child support, spousal maintenance, workers compensation, unemployment insurance, Public Assistance, Railroad Retirement benefits, and Black Lung benefits. Otherwise, $1,740 on all other accounts. See the New York LawHelp Consortium Consortium for more information. 9. Tennessee: Up to $4,000 of any personal property, including a financial account, can be exempted. See Tennessee § 26-2-103 for details.

State-by-state collection laws. Source: Bills.com

The amounts listed in the chart’s columns are what is protected from collection, what you will be left with should a collector pursue a particular asset or your income. Pay attention to the footnotes, where listed.

  • FDCPA Applies refers to the Fair Debt Collection Practices Act, which customarily applies to collection agents/debt collectors. In the states indicated, the FDCPA applies to original creditors, too.
  • The Homestead Exemption shows the amount of equity in your primary residence that even a judgment-creditors cannot pursue. The exact amount you can protect depends on the exemption in your state of residence. Some states have no exemption whatsoever. Some states have unlimited exemptions, where all the equity in an expensive mansion is completely protected.
  • The Vehicle Exemption protects equity in one vehicle up to the amount listed for your state. If you owe money on the vehicle, subtract what you owe from what it is worth, to see if your vehicle is totally exempt or not. In some states, a vehicle that is worth more than the exempt amount can be seized and sold, with the exempt amount returned to the owner.
  • The Bank Account Exemption lists how much is safe from a judgment-creditor’s collection efforts. Some states offer no protections; anything in your account can be levied.
  • The Wage Exemption shows what part of your wages are protected from wage garnishment, and is the amount that most creditors cannot pursue.

Although we believe this information to be accurate as of the date of its posting, we cannot guarantee the accuracy of the information provided. Consult with an attorney in your state for specific information regarding the laws and exemptions that apply to you in your circumstances.

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Frequently Asked Questions

Who do debt collection laws protect you from?

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Most collection laws protect you from debt collection agencies only — meaning third parties hired to collect debts owed to other businesses. Unfortunately, they usually don’t protect you from the original creditor (the business your debt originated with).

Debt buyers — or businesses that purchase unpaid debts from creditors — are often viewed as “original” creditors too. Because of this, they often don’t fall under the purview of FDCPA and other debt collection laws.

Some states are an exception, though. If a debt buyer or original creditor is harassing you or committing some other activity you feel may be illegal, talk to a local attorney about your state’s specific debt collection laws. 

How can I report bill collectors for violating debt collection laws?

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If you suspect a third-party bill collector has violated any of the above laws for collection agencies, then you have some options.

First, you can hire an attorney and seek legal action. You can also file an online complaint with the Consumer Financial Protection Bureau or Federal Trade Commission or call the CFPB directly at 855-411-CFPB (2372). Finally, you can contact your state's attorney general. If other consumers have reported similar behaviors, they may investigate the company and seek legal recourse against it.

Can I stop debt collectors from contacting me?

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Under the FDCPA, you have the right not to be contacted during certain hours, at work, or via methods you request them not to. If a bill collector violates this law, you can write a letter and request the communication to stop. Make sure to keep a copy for yourself, and consider sending it via certified mail, which gives you a return receipt once the collector receives it.

The Consumer Financial Protection Bureau has sample letters you can use as a starting point, but generally, you want to include: 

  • Your name, address, and the date

  • The name and address of the debt collector

  • The number on the account, if there is one

  • The date, time, and method of contact they used during your last communication

You can ask the collector to stop contacting you entirely (though this doesn’t dismiss the debt or excuse you from legal action regarding it), or you can use the letter to stipulate how and when you’re willing to be contacted.

If you ask the debt collector to stop contacting you altogether, you’ll only hear from them again to say there will be no further contact or if they are legally required to contact you (like to serve you a lawsuit). 

How can I dispute a debt if I don’t think it’s mine?

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If you don’t believe the debt is yours — or you think you’ve paid it off already, you can dispute all or part of the debt. To do this, you’d need to dispute it in writing within 30 days of learning about the perceived debt. The CFPB also has sample letters for doing this. 

After the collector has received your dispute, it can no longer try to collect on the debt until it has sent you some sort of written proof that it is, indeed, yours. This might include an original bill from the creditor, a physical receipt, or some other documentation. 

Again, make sure you send the letter via certified mail, which will ensure you’re notified once the collection company has received it.

What should I do when a debt collector contacts me?

When a debt collector contacts you, avoid revealing any information about yourself or your finances.

You should also ask for some basic details about the debt, including:

  • The name of the original creditor

  • The balance of the debt (and any added fees or interest they’re trying to charge)

  • When the debt was accrued

  • Who the collector believes owes the debt

Finally, ask that the collector communicates with you in writing moving forward to ensure you have a paper trail.

Can bill collectors call someone else about my debt?

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Generally speaking, collection laws stipulate that only you, your spouse, or your attorney can receive information about your debts. A debt collector can contact other people in an attempt to gather your contact information (address, phone number, etc.), but they may not reveal the reason for the call or anything about your debts. They typically can’t contact someone more than once either.

Can I be contacted on social media about my debt?

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Yes, debt collectors can contact you on social media — but not publicly. Collection agencies may only contact you privately so that the general public or your social connections cannot see. They also must identify themselves as a debt collector and provide a way for you to opt-out of their messages — at least on that particular social platform.

What are my options for handling my debt?

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If you don’t have the funds to pay off your debts outright, there are other options. First, you can talk to a credit counseling agency. They can get you on a debt management plan to help you pay off your debts within a certain timeframe (usually a couple of years).

You might also talk to a debt relief company. They can offer services like debt settlement, which entails negotiating with your creditors for a reduced payoff. Refinancing or consolidating your debt might also be an option depending on your credit.

10 Comments

KKay, May, 2021

A collection company for a credit card has won a default judgement against me in Texas. My wages are exempt from garnishment in TX, but my bank account is not. Can I open a bank account in a state that does not allow account levy/garnishment?

JJoshua Abreu-Rosa, Aug, 2021

Hello Kay,

Thank you for reaching out. Please do not take my answer to be legal advice, as I am not an attorney and only attorneys can offer legal advice. The creditor is going to have some insight regarding new open accounts. They may have the right to freeze a new account. The best option is to speak with an attorney who can give you clear advice.

Regards, Josh

BBJ, Apr, 2021

My son voluntarily surrendered his 2017 truck 3 months ago. He was notified after the auction he still owes $12,000. Part of his loan was $4,000 for extended warranty. Since this is not part of the vehicle, is he still responsible for the $4,000?

JJoshua Abreu-Rosa, Aug, 2021

Hello BJ,

Thank you for reaching out. We are sorry to hear your son is dealing with this financial stress. However, by voluntarily returning the vehicle, your son showed some responsibility for the debt he owes. For this reason, lenders may consider a voluntary surrender to be slightly less negative than a repossession. You may have also saved money from additional fees that often occur when a vehicle is repossessed, such as towing charges. 

The 4,000 is part of the loan as you mentioned. Therefore, when the lender resells the vehicle, and the proceeds will go toward the loan including the 4,000. The 12,000 appears to be the remaining balance after the sale of the auction. 

If your son is having issues paying this off he may want to look into our affiliates like Freedom Debt Relief. They can review his account and determine some options that could be more affordable and attempt to reduce this cost via negotiation. If interested please call 800-852-1431. They will be happy to assist you. 

Regards, Josh 

FFran Dresher, Feb, 2021

Had a civil judgement in Florida regarding a check I wrote in 2015 ,never was served proper paperwork but they managed to get a default judgement originally the check was 2k , it’s now up to a garnishment /levy for 22k ..this was in Florida I just moved to Illinois..it’s from a predictor y lawyer in Florida ..can it follow me to Florida and what is my best option to get them to stop

JJoshua Abreu-Rosa, Aug, 2021

Hello Fran, 

Thank you for reaching out. Please, do not take my answer to be legal advice as I am not an attorney. Only attorneys can offer legal advice. 

A domestic judgment is rendered by the courts of the state or county in which the judgment or its effects are at issue. An example of this would be if a person lived in California, and had judgments in Oregon. All states are to honor judgments issued by other states: meaning, if a creditor obtains a judgment against the debtor in one state, they can request that judgment be recognized in another. 

Regards, Josh 

KKasey, Feb, 2020

I live in Missouri and have a joint bank account with my child's father. We have had this account for only about 6 months. He is the sole contributor to this account and the only reason to have me on it was so that I would be able to get things for our son when needed. My child's father received his tax refund by direct deposit and two days later a levy hold was put on 50% of the entire accounts balance. After contacting the bank they said it was a levy for past due child support of mine from my older children that do not live with us. We live paycheck to paycheck as is and are trying to support our infant son. My question is this legal for them to do or is there a chance we could fight it and get it back? None of the money in that account actually belonged to me or came from my employment. Any advice on this would be grateful.

DDaniel Cohen, Mar, 2020

Kasey, I am not a lawyer, so whatever I share with you is my opinion and not to be considered legal advice.

Any account that has your name on it is fair game, as far as I know. Back child support is a debt that has wide authority to collect on. I don't believe that proving that the money came to your child's father will change anything.

MMichelle, Feb, 2020

I purchased vehicle new 1/13 1st purchase 15k 18.9% A.P.R $400 mo. Payments. I stoped making payments 8/17 credit report says closed 12/17 c/o profit/loss purchased by another lender.100% paid off. Balance 9k last payment 2/19 that’s wrong I haven’t paid since 8/17 balance has gone up and down through out years. when I asked if I could refinance because apr was preventing me from paying off. They said they don’t offer. Every other place I tried to trade or refinance said I was upside down . Car never was reposed. It’s Registered and insured to address. Can collection co. Come to repo car? If I disputed because payment info is wrong would it wake it up and start the statute of limitations over? Also there not on my dmv paperwork it still shows og lender as l/o

DDaniel Cohen, Mar, 2020

Michelle, I am not a lawyer so anything I share with you is not to be considered legal advice.

You present a complicated set of facts. Submitting a request to validate the debt does not restart the SOL.

If the new company legally purchased the debt from the orignial lender, then they could repo the car, provided the terms of the original contract allow that as a remedy for non-payment. Their ability to do so is not hindered by the DMV paperwork showing the original lender.

Do you know the SOL on debt for a written contract in your state? Even if the SOL could be used as an affirmative defense and protect you from paying, it would not insulate you from a repossession.