Most people think that they can lose everything in debt collection. But, under the law, debt collectors are not supposed to seize all your assets. If you are applying for your license as a debt collector, you may think about this law.
The Fair Debt Collection Practices Act covers debts such as loans. This act imposes that you cannot take certain funds in debt collection.
You need to know the debt collection exemptions to get a debt collection license. Read this article to learn more about what are debt collection exemptions.
Debt Collection License
First, let’s look at the steps in getting your license. All debt collectors needed to have their legal licenses to operate in the state.
To apply, submit your application to the NMLS, who will then review your application. You can still operate while waiting for your application status. Discover more here if you want to know more about license applications.
If your license has approval, the next step is to follow the FDCPA. FDCPA includes the collection exemptions and other laws protecting the consumers.
Under the FDCPA, debt collection exempts benefits given by the government. These benefits are:
- Public Assistance
- Supplemental Security Income (SSI)
- Veterans Benefits (VA)
- Child Support
- Workers Compensation
- Unemployment Insurance
- Social Security Disability (SSD)
- Social Security
Some states also have other laws about debt collection and exemption. As debt collectors, you can take money benefits not given by the government.
Public or private pensions are also off-limits to debt collectors. These include railroad retirement benefits and pensions secured in their savings account (IRA).
Generally, you can collect the income. However, federal law allows up to 25 percent of the net income only.
Some factors affect the amount collected. These factors include the minimum wage and whether they have SSI or other benefits. 90 percent of the income earned within the last 60 days is also exempted from debt collection.
The creditor can collect personal items, but there are exemptions. These exemptions include:
- Furniture, clothing, and appliances
- Medical equipment
- One television, one radio, one computer, and one cellphone
- Personal items not exceeding $1000 in value
- Items needed for work not exceeding $3000
Creditors can collect cars only if their equity is more than $4000. You cannot take a car that wasn’t fully paid for.
Judgment proofs are debtors who don’t have assets or income that creditors can collect.
However, the debtor should pay if their situation changes and they have non-exempt assets.
Creditors are not allowed to take money from paychecks without your consent. You can sue the debtor before you can collect funds and other assets.
Things To Know About Debt Collection Exemptions
Debt collectors should not contact the debtor for old debts. Although some states may allow you to do this, you cannot sue them for time-barred debts.
There are also laws about the allowed time you can contact the debtor. Follow these debt collection exemptions to maintain your license.
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