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Debt Collection Basics and Exempt Income from Judgment

submitted by Brandy Hernandez-Hamil, Paralegal

The term “judgment proof” is often used when referring to an individual who may not be subject to income garnishments or property liens from creditors for a debt.  There are many requirements to become judgment proof, however.  The information below can be helpful to determine your rights when you are being pursued for a debt by a creditor.  As with any legal issue, it is important to consult with an attorney to know your rights.

Before determining if an individual is judgment proof, we have to look at the following steps:

Who is attempting to collect the debt?

  • Original Creditor – the person or company who gives you something of value: credit, goods, services, money in exchange for your promise to pay them back. Banks will often attempt to collect their own debts for six months or so before assigning the debt to a debt collector.
  • Debt Collector – a person or company in the business of collecting and attempting to collect debts owed or due. These are third –party companies or collection attorneys who are attempting to collect the debt on behalf of the original creditor, who still owns the debt.
  • Debt Buyer– a person or business that specializes in buying and collecting old debt. Once the debt is sold, the original creditor no longer has any right to it.

Exempt Income from Judgment

The law protects certain types of income and property from garnishment by creditors. Creditors cannot take these funds from you to pay off a debt, even if a court issues a judgment to the creditor for a debt.  These funds are Exempt.

What federal benefits are exempt from garnishment?

  • Public Assistance
  • Supplemental Security Income (SSI)
  • Social Security
  • Social Security Disability (SSD)
  • Veterans Benefits (VA)
  • Child Support
  • Spousal Support
  • Workers Compensation
  • Unemployment Insurance
  • Railroad Retirement Benefits
  • Public and private pensions
  • Retirement savings account (401(k)), 403(b), and IRAs)
  • All of the principal and 90% of payments from a private trust

How much money can you keep in your bank account?

New York law protects certain bank accounts from creditors and debt collectors. Certain funds listed above are protected by the Exempt Income Protection Act (EIPA). 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 $2,850.  Having exempt funds in excess of this amount may still be subject to garnishment, however.  A new adjustment amount is scheduled for April 1, 2021 of this year.

*Most garnishment will be for judgments for consumer debt. Consumer debt includes debts from credit cards, doctor bills, hospital bills, utility bills, phone bills, personal loans from a bank or credit union, debts owed to landlords or former landlords, or any other debt for personal, family or household purposes*

CELJ’s Consumer Protection Department represents individuals who have fallen behind on certain financial obligations.  When someone falls behind on a bill, they will often receive harassing telephone calls and letters.  CELJ can step in and handle conversations with creditors on your behalf and we can also make sure that the harassing calls and letters stop coming to you.  Below are just a few strategies CELJ employs to help relieve the stress that can come from dealing with aggressive creditors.

Steps the consumer unit takes on our client’s behalf:

  • Cease Communication Letter

A cease and desist letter is a formal letter requesting debt collectors to stop contacting you about a debt you may owe. The federal Fair Debt Collections Practices Act (FDCPA) requires debt collectors to cease any communication with you after they receive the letter.

  • Debt Verification

Debt buyers must prove they have the right to collect a debt.  You have a right to demand that a creditor prove (1) that the debt is accurate and (2) that they have a right to collect it. To do this, the creditor must show an unbroken, valid chain of assignment back to the original creditor. Most debt buyers have difficulty proving that they have the right to collect a debt.

  • Hardship Request Letter

Requesting the debt owed be written off due to financial hardship.

  • Court Representation

CELJ represents clients in civil lawsuits brought by a creditor.  Creditors initiate a lawsuit by serving you with a “Summons” and “Complaint.”  The Summons informs the debtor (or the person who owes a debt) that they are being sued and it also lists the time they have to respond to the Complaint . The time to respond can be very short, so it is important you contact an attorney to know your rights immediately.  The Complaint outlines the facts and circumstances that give rise to the lawsuit.  The Complaint will also inform the court how much the creditor is seeking to recover from the debtor.”

Example Letter of a Financial Hardship Request


Your name

Your Address

City, State Zip Code


Debt Collector Name

Debt Collector Address

City, State Zip code


RE: Account Number XXXXXXXXX


Dear Sir or Madam:

I am writing to request that you stop contacting me regarding account number (Fill in your account number xxxxxx) with (name of creditor example: Capital One), as required by the Fair Debt Collection Practices Act 15 U.S.C. section 1692c(c).

I am unable to make payments on this account and I kindly request that the account be written off for financial hardship. I am a (xx your age)-years old and my only source of income is (State your income source) example: [Social Security, SSI, pension, disability], which is exempt from collection under New York’s Exempt Income Protection Act. I do not have future employment opportunities and I do not have any assets nor own any real property that are available to creditors.

Further, I have enclosed verification of my income source for your review.

This letter is in no way an acknowledgment that I owe this money. Please stop contacting me about the above-referenced debt. Thank you in advance for your cooperation.


[signed name]

Your Name


If you have questions regarding your rights, we encourage you to contact CELJ to schedule a consultation with our Consumer Protection Department at 716-853-3087.

The above content is to be used for information purposes only and is subject to change at any time.  This information does not create an attorney-client relationship between CELJ and the recipient.








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