Debtor Defenses

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Creditor-Debtor law is not just about creditors' rights, but also about debtors' rights. The latter usually comes in two varietals:

(1) Procedural Due Process ~ The creditor must carefully follow all the procedural steps to obtain some remedy, and the debtor in defense may assert a technical violation by the creditor; and
(2) Exemptions ~ Certain assets are off-limits for enforcement, as determined by the local state legislature or -- if the debtor is in bankruptcy -- by the federal law.

One might argue that there is another category, being the rights of third-parties to the assets of the debtor, such as those of secured parties. However, the objections of these third-parties are theirs and theirs alone and typically cannot be properly asserted by the debtor (although sometimes a debtor can attempt to assert them to muck things up).


The enforcement of a judgment against an asset of the debtor is a court-ordered (and thus government) "taking" which requires that the debtor be afforded her full due process of law rights before losing the asset to a creditor. This means that if the creditor has missed a step somewhere, such as giving a wrong interest rate number on a writ of execution, the debtor can for the time being stop the enforcement. Of course, this is usually just a short-term defense, because the creditor will in most cases just do things right the next time and finally get at the asset. There are, however, creditors out there who can't seem to ever get things right -- particularly if they are inexperienced in post-judgment enforcement -- and continually frustrating the creditor can lead to a more favorable settlement of the judgment.

All this is why the most effective defense counsel for debtors are usually all judgment enforcement counsel who can spot errors in the creditor's submissions.


Because the states don't want debtors to be completely divested of all means of living, thus becoming an additional burden upon the already-stretched social safety net of the state, all the states have created minimum levels of certain assets that are off-limits for judgment enforcement. The most common assets which are protected are:

(1) Some amount of equity in a personal residence;
(2) Some amount of equity in a personal vehicle;
(3) Some amount of jewelry and firearms;
(4) Some amount of tools of the debtor's trade or profession;
(5) Some amount of farmland, livestock, etc.;
(6) Some amount of money in retirement plans, life insurance and annuities.

Depending on the state, there are usually often to be found a number of odd exemptions, such as the family Bible (which, in older times, was often used to record the geneological history of the family).

The U.S. Bankruptcy Code has its own set of statutory exemptions, but a particular state may "opt-in" or "opt-out" of these provisions; if the latter, the state substitutes its own list of exempt assets for those found in the Bankruptcy Code.

NOTE: Certain exemptions are available to the debtor without the debtor making a claim for them, whereas other exemptions require the debtor to make a timely claim (and the exemption is lost if the debtor does not do so).

Wages are also usually the subject of a state exemption for some amount, but the state exemption can never be worse than that found in the Federal Wage Garnishment Law, i.e., a state can offer a greater protection for the debtor's wages than the FWGL, but if there is a lesser protection then the FWGL overrides the state exemption.

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