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What is Exempt from Debt Collection?

New York State Law protects certain bank accounts from creditors and debt collectors. Certain funds such as government benefits, pensions, and some earned income are protected by the Exempt Income Protection Act. Creditors and debt collectors are not permitted to freeze these accounts because of private debts. Under the Exempt Income Protection Act, an account may not be frozen if it contains less than $2,750 and the account contains directly deposited exempt benefits. Additionally, all other accounts totaling less than $2,100 may not be frozen by creditor or debt collectors under EIPA. If you earn $270 or less per week, all of your earned income is exempt from debt collection. If you earn $270 or more per week, 90% of your gross income or 75% of your disposable income, whichever is greater, is exempt from debt collection.

The benefits and retirement funds that are exempt from debt collection include:

  • Public Assistance
  • Social Security
  • SSI
  • Veterans’ benefits
  • Child Support
  • Spousal Support
  • Worker’s Compensation
  • Unemployment Insurance
  • Railroad Retirement benefits
  • Black Lung benefits
  • Public and Private Pensions
  • Retirement Saving Accounts such as 401(k), 403(b), and Individual Retirement Accounts
  • All of the principal and 90% of the payments from a private trust

If the funds in an account are exempt from debt collection, a creditor must release the hold on the account regardless of whether there is a judgment against you. You may notify the creditor’s attorney that the funds in the frozen bank account are exempt from debt collection and demand the release of the account. The attorney may request proof that the income in the account is exempt. Bank statements from the past three months will suffice as proof. Even in cases where funds are exempt, vacating a default judgment makes sense as vacating the judgment eliminates the need for an exemption hearing altogether.

The following kinds of personal property are exempt from debt collection and cannot be seized by a Marshal: (1) household goods such as furniture, clothing, and appliances; (2) medical equipment such as a wheelchair; (3) one television, one radio, one computer, and one cell phone; (4) personal items not exceeding $1,000 in value, such as jewelry and art; (5) tools needed for work not exceeding $3,000 in value; and (6) $1,000 in personal property or cash. A Marshal may seize your car if the equity in your car is greater than $4,000. Exempt income or property may never be used by a debt collector to pay a debt even in instances where the court has entered a judgment against you. However, judgements have other negative consequences and should be avoided if possible.

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