Collecting Against Consumers, and the Head of Household Exemption

Let’s say that you get a judgment against someone who owes you money. You then proceed to try to collect on that judgment, but your attorney tells you that they are claiming a head of household exemption, and that because of that, it will be difficult if not impossible to collect what is owed.

Can they do this? And just what is head of household?

Florida Collection Exemptions

Florida has a number of exemptions for debtors to use. Exemptions are protections from collection—essentially, assets that a creditor or judgment holder cannot collect upon.

One commonly known exemption is the homestead exemption. With certain limitations, as a general rule, a creditor cannot take someone’s homestead property, no matter what the value or equity in the property, to collect on a debt.

Head of Household

Another lesser known exemption is the head of household exemption.

The head of household exemption is limited and can only be used by a limited class of people.

To claim the exemption, someone must pay at least half of the expenses in a household for any dependents. The dependent can be an adult, and does not actually have to live in the home that the debtor lives in (for example, child support to a child that lives with the other parent is considered paying for expenses for a dependent).

If that requirement is met, then the first $750 per week that the debtor earns is protected. If a debtor makes $750 or less weekly, then none of that debtor’s income can be taken (note that this is only income, it doesn’t include any property the debtor may have that may have a value).

Federal Laws

For debtors who make more than $750 a month, only the amount that exceeds that dollar figure can be collected upon or used for wage garnishment–at least under state law.

There is one more caveat however—pursuant to federal law, the maximum amount of income that can be taken from a consumer to collect on a judgment or debt is 25% of the consumer’s disposable income (a term that is defined under federal law).

So, that means that even if the debtor makes more than $750 a week, you still might not be able to collect against a consumer’s income if the amount that exceeds $750 weekly is more than 25% of the consumer’s disposable income.

Money in the Bank

Both exemptions don’t just apply to whatever paychecks the debtor receives. They also will protect the same amount of income for any past income that may be in a bank account for the previous 6 months if the money in the bank account can be traced back to wages or earning income. However, the money in the bank from income can be mixed with (commingled with) other, non-income moneys.

Collecting a judgment against a consumer or business isn’t as easy as you would think. Get help. Call the West Palm Beach commercial litigation lawyers at Pike & Lustig today.

Sources:

leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&URL=0200-0299/0222/Sections/0222.11.html

floridabar.org/public/consumer/tip006/