New York State’s Exempt Income Protection Act or EIPA protects some types and amounts of money when a company sues you for a consumer debt like a bank debt, credit card debt, rent arrears, medical debt, or auto loan. When the only income you get is government benefits, child or spousal support, or retirement money, all that income is protected, or “exempt” under the law.

If all your income is exempt and you do not have any assets like a bank account over $3,425 or $3,960, or a house that you own, you’re considered “judgment proof.” This means that even if a judge decides that you owe money to a company and gives that company a judgment against you, the company isn’t allowed to take any money from you unless you agree to give it to them.

If you’re judgment proof because you only get exempt income, we generally do not recommend you agree to a settlement, payment plan, or other agreement with a debt collector or their attorney to give them this money that is protected by the New York EIPA law. The law protects these sources of income from debt collection because it is important you have enough money to pay for basic necessities like food and shelter.

Judgment proof does not mean a company cannot sue you to try to collect a debt. A more accurate term than “judgment proof” would be “collection proof,” because even if your income is exempt from debt collection, a company can still file a lawsuit to collect the debt and a court can still enter a judgment against you, but the company may not enforce the judgment against you by taking your exempt income.

Here are some things you can do:

• You can keep copies of documents that show your income is exempt.
• You can explain when you go to court that you are “judgment proof” and ask the court to dismiss the case.
• You can call 311 and ask for a free financial counselor for help with debt and credit.
• You can also call another legal services provider to see if someone can represent you as your attorney in your case.
• If a creditor takes or attempts to take your exempt income by restraining or “freezing” your bank account, contact your bank, inform them that all of the funds in your bank account are exempt, and request an “Exemption Claim Form”
• If a creditor takes or attempts to take your exempt income by garnishing your wages, contact your employer in writing and inform them that your wages cannot be garnished because they are protected by law.

Be careful: A company or their attorney can and may try to get you to voluntarily agree to enter an agreement (also known as a “stipulation of settlement”, “payment plan” or “settlement agreement”) to pay an alleged debt. If all your income is judgment-proof, you do not have to make or agree to a settlement, payment plan, or other types of agreement because all your income is supposed to be protected by law.

If a company sues you about a consumer debt, like a bank debt, credit card debt, rent arrears, medical debt, or auto loan, and you lose the case, the company gets a judgment. The judgment means the court decided you owe a certain amount of money. It gets bigger over time with interest and fees. The judgment gives the company the right to take certain types and amounts of money, with some exceptions.

These rules apply to consumer credit cases, which include:

• Credit card bills
• Medical bills
• Bank loans
• Rent arrears
• Other private consumer debts

Different rules apply if your debts are:

• Money owed to the government
• Child or spousal support
• Business related

Under the NYS EIPA law, companies with judgments in a consumer credit case do not have the right to take everything you own. Certain types and amounts of income and property are protected or exempt from debt collection under the law and cannot be taken away without your permission no matter how much they claim you owe.

Under state and federal law, certain types and amounts of income are considered exempt (meaning they cannot be taken from you to pay a judgment).

The following types of income are exempt from debt collection:

• Social Security
• Social Security Disability (SSD)
• Supplemental Security Income (SSI)
• Public Assistance
• Wages earned while receiving SSI or Public Assistance
• Veterans benefits
• Unemployment insurance
• Payments from pensions and retirement accounts
• Disability benefits
• Income earned in the last 60 days (90% of which is exempt)
• Child support
• Spousal support or maintenance (alimony)
• Workers compensation
• Railroad retirement benefits
• Black lung benefits

Certain amounts of earned income are also exempt, including:

• If you are employed, work in NYC, and earn $495 or less per week in disposable income (meaning your income that is left after mandatory deductions are taken out of your paycheck) –> ALL of your wages are exempt
• If you are employed, work in NYC, and earn more than $495 per week in disposable income (meaning your income that is left after mandatory deductions are taken out of your paycheck) –> 90% of your gross income or 75% of your disposable income, whichever is greater, is exempt

Certain amounts of income in your bank account are exempt.

If your bank account contains:

• Exempt Income ONLY –> a company is not allowed to take any funds out of your bank account without your permission.

If your bank account contains:

• Income from non-exempt sources ONLY (in other words, your account contains NO Exempt Income) –> the first $3,960 in your bank account is protected and a company is not allowed to freeze or take that money, unless you give a company permission to take it

If your bank account contains:

• Exempt Income; AND
• Income from other sources –> the first $3,425 in your bank account is protected and cannot be frozen or taken to collect on a judgment, unless you give a company permission to take it

• You are judgment proof if:
  • All of your income is exempt: you do not have any income that companies are allowed to take from you unless you agree to give it to them, AND
  • You do not have any assets or property that companies are allowed to take from you unless you agree to give it to them.

Yes, judgment-proof status can change if your income source(s) and/or amount changes.

• For more information, visit the website for The New Economy Project — What is exempt from debt collection?
• For assistance with non-litigation financial matters, including frequent and/or harassing communications from debt collectors, negotiating with creditors, questions about your credit score or credit report, and other questions about credit or debt, you can call 311 and ask to schedule an appointment with a New York City Financial Empowerment Center free financial counselor. For more information, including how to book an appointment online, visit Financial Empowerment Centers online.

The information in this document has been prepared by The Legal Aid Society for informational purposes only and is not legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. You should not act upon any information without retaining professional legal counsel.