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How can I keep my exempt income safe from creditors?

Produced by Mariah Jennings-Rampsi, South Coastal Counties Legal Services, with funding from American College of Bankruptcy
Created June 2012

There are 2 different types of creditors who can collect debt.

  1. the “original creditor”, or
  2. the “original creditor’s” lawyer or a “debt collector”.

Original Creditor

We use the term “original creditor” to talk about the person or company you first agreed to pay. An original creditor is the person or company who sold you something on credit or loaned you money.

Debt Collector

Debt collectors are creditors too. Sometimes the original creditor hires another company or a lawyer to collect the debt. Sometimes the original creditor sells the debt to another company. The new company or person is a debt collector.

Produced by Mariah Jennings-Rampsi, South Coastal Counties Legal Services, with funding from American College of Bankruptcy Foundation
Reviewed December 2019

If a debt collector contacts you about a debt that you cannot pay, you can send a “cease letter” that tells the debt collector not to contact you anymore.  In the letter explain that your income is “exempt from debt collection”. You can use this sample cease letter.

If you notify the original creditor that your income or property is exempt, they may also stop collection actions against you.  Often creditors will not bother trying to collect from execution proof debtors.  But they do not have to stop like debt collectors do.  Write to the original creditor and explain your situation.

  • Describe the source of your income clearly, especially if you have no money they can reach .
  • Include the citations to the specific law which protects your income and things. These citations are listed in How can I stop creditors from taking my money and things? 
  • You can also include in your letter any information that makes your case more sympathetic – like disability, advanced age, dependent children, or extreme poverty.

Even though your income and property cannot be reached, the creditor may sue you for the money anyway. If the creditor takes you to court, tell the judge and the creditor that you are “execution proof.”  If the creditor wins the collection case against you, they may try to take your income.

If your income is protected:

  1. keep it in a bank account separate from all your  income that is not protected.  This helps to make clear that the creditor cannot take the protected money.
  2. It also helps to have the checks of only the exempt income directly deposited into the account so that you have proof that the account holds only protected income.
  3. Write a letter to the bank. Tell them that your account holds only protected income. If you have already written to them, the bank should not freeze the account if your creditor gets a judgment against you.  You can use this sample letter to a bank regarding exempt account.
  4. You can also ask Social Security to pay you on a DirectExpress debit card.

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