How can I keep my exempt income safe from creditors?

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.