Indianapolis, IN – Hoosier families have still not recovered from the Great Recession of 2008, and the astronomic growth of the debt buyer industry makes them increasingly vulnerable to seizure of essential wages and property to pay their debts. A new report from the National Consumer Law Center surveys the exemption laws of the 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands that protect wages, assets in a bank account, and property from seizure by creditors. No Fresh Start in 2019: How States Still Let Debt Collectors Push Families into Poverty finds that Indiana’s laws do not meet basic standards so that debtors can continue to work productively to support themselves and their families.
State grades are determined using five elements; protection of a living wage, the home, a car, a basic amount in a bank account, and household goods. Indiana received a D overall with an F for extremely weak protections of homes and household goods, a D for weak protections of wages and bank accounts, and a C for automobile protections that have many gaps and weaknesses.
“Allowing debt collectors to drive families into poverty by seizing assets and garnishing wages is not only cruel, it’s counterproductive,” said Erin Macey, senior policy analyst at Indiana Institute for Working Families. “Financially stable families are better able to meet their obligations than those driven to the brink of bankruptcy.”
“This report serves as a wake-up call for states to update their exempt property laws and stop putting millions of families at risk. It’s a travesty when state laws fail to protect a living wage, a working car, and a bare bones checking account,” said Carolyn Carter, National Consumer Law Center deputy director and author of the report.
Key Recommendations
The NCLC report recommends that state exemption laws should be reformed to:
? Preserve the debtor’s ability to work, by protecting a working car, work tools and equipment, and money for commuting and other daily work expenses.
? Protect the family’s housing, necessary household goods, and means of transportation.
? Protect a living wage for working debtors that will meet basic needs and maintain a safe, decent standard of living within the community.
? Protect a reasonable amount of money in a bank account so that debtors can pay commuting costs as well as upcoming rent and utility bills.
? Protect retirees from destitution by restricting creditors’ ability to seize retirement funds.
? Be automatically updated for inflation.
? Close loopholes that enable some lenders to evade exemption laws. For example, states that allow payday lending enable these lenders to evade state laws that protect wages and exempt benefits from creditors. States that allow lenders to take household goods as collateral enable these lenders to avoid state household good exemptions.
By updating its exemption laws, Indiana can prevent over-aggressive debt collectors from reducing families to poverty. These protections also benefit the state by keeping workers in the workforce, helping families stay together, decreasing consumer bankruptcies, and reducing the demand on funds for unemployment compensation and social services.
The Indiana Institute for Working Families – a program of the Indiana Community Action Association (INCAA) – promotes public policies to help Hoosier families achieve financial well-being. We value, gather, and translate quantitative and qualitative data to communicate the opportunities and challenges that Hoosiers experience. We advance well-being by promoting evidence-based solutions and building coalitions to engage in direct and strategic conversations with policymakers and the public.
Since 1969, the nonprofit National Consumer Law Center® (NCLC®) has worked for consumer justice and economic security for low-income and other disadvantaged people in the U.S. through its expertise in policy analysis and advocacy, publications, litigation, expert witness services, and training.