What Is Exempt From Debt Collection?
State law in New York protects certain bank accounts from creditors and debt collectors. Certain funds including pensions, government benefits, and some of your earned income are protected by the Exempt Income Protection Act. Debt collectors and creditors are not permitted to freeze these accounts because of private debts. Under the Exempt Income Protection Act, an account may not be frozen should it contain an amount below $2,750 and the account contains exempt benefits that were deposited directly. 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, your income will be exempt from debt collection in its entirety. If you earn more than that per week, either 75% of your disposable income or 90% of the gross income is exempt, depending on which is greater.
The benefits and retirement funds that are exempt include:
- Public Assistance
- Spousal Support
- Veterans’ benefits
- Child Support
- Railroad Retirement benefits
- Worker’s Compensation
- Private and Public Pensions
- Social Security
- Unemployment Insurance
- Black Lung benefits
- Retirement Saving Accounts such as 403(b), Individual Retirement Accounts, and 401(k)
- All principal and all but 10% of the payments from a private trust
If the funds in an account have been exempted from debt collection under EIPA, 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 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 collection and cannot be seized by a Marshal: (1) household goods such as appliances, clothing, or furniture; (2) necessary medical equipment, like wheelchairs; (3) one each of a cell phone, radio, computer, and television; (4) personal items such as art or jewelry not exceeding $1000 in value; (5) tools used for work valued at or below $3,000, and; (6) cash at or below $1000.
A Marshal may seize your car if the equity in your vehicle is $4,000 or more. 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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