Exempt Property in Debt Collection: Forms and Instructions

Exempt Property

This guide explains what property is protected (or "exempt") from creditors and what you need to do if your exempt money or property has been taken or frozen.
Last Updated on May 10, 2022
Overview

Guide Overview

Certain federal and state laws, called “exemptions,” protect some kinds of money and property from being taken to pay debt judgments. The Protected Property Claim Form is a form you can fill out and turn in to the court if you would like to get back exempt money or property that has been frozen or taken. This guide contains instructions for how to complete the form, turn it in, and prepare for your hearing on exemptions. 

Research Tips

Collection of a debt judgment can be very confusing because there are several ways creditors can try to collect, and they are all slightly different. Garnishment and receiverships are the most common ways that this is done. It is important to understand what process creditors are using and how that process can affect your case.

Read Legal Research: Steps to Follow.

The relevant statutes for post-judgment collection are:

The Texas Supreme Court recently issued new and amended Texas Rules of Civil Procedure relating to exempt property and post-judgment collection. You can see the new rules here. 

The complete Texas Rules of Civil Procedure are available online on the State of Texas Judicial Branch's Rules and Standards page.

You can also read these articles by to learn more about debt collection and exempt property. 

Common questions about Exempt Property

Under Chapter 42 of the Texas Property Code, the following types of property are exempt from being taken or frozen to pay a judgment: 

  • Current wages 
  • Social Security Administration benefits, including Social Security Retirement, SSI, and SSDI
  • Veterans Administration benefits
  • Railroad Retirement Board benefits
  • Office of Personnel Management retirement benefits
  • FEMA disaster benefits
  • Workers’ compensation benefits
  • Unemployment benefits
  • Child support, alimony, and spousal support
  • Pension and retirement benefits
  • Proceeds from the sale of a homestead (for up to 6 months after the sale)
  • Tax-deferred retirement accounts, like 401(k) and IRA accounts
  • Professionally prescribed health aids
  • Education savings accounts
  • Health savings accounts
  • Temporary Assistance for Needy Families (“TANF”) funds
  • Life insurance and annuity benefits
  • Religious bible or other sacred religious book

In addition, the following types of property may be protected up to a combined value of $50,000 for a single person (or $100,000 for a family): 

  • Home furnishings, including family heirlooms 
  • Food and similar items for consumption 
  • Farming or ranching vehicles and implements 
  • Tools and equipment used for a job 
  • Clothes 
  • Jewelry up to $12,500 for a single person or $25,000 for a family 
  • 2 firearms 
  • Athletic and sporting equipment 
  • 1 motor vehicle for each member of the family 
  • 2 horses, mules, or donkeys with food on hand and riding equipment 
  • 12 head of cattle with food on hand 
  • 60 head of other livestock with food on hand 
  • 120 fowl with food on hand 
  • Household pets 
  • Unpaid commissions for personal services up to $12,500 for a single person or $25,000 for a family   

These exceptions apply to most consumer debts like credti card debt and healthcare debt. However, these exemptions do not apply to cases involving debt from past-due child support, spousal support, or certain federal debts (like income taxes or  student loans). 

Read more about exempt property at What Property Can Be Protected from Creditors.

Generally, yes, a creditor needs to have a judgment from a lawsuit against a debtor in order to seek the court's help to collect. Once a judgment is entered, creditors can send papers called "post-judgment discovery" and begin the process of taking property and accounts to pay the debt.

If a creditor recently won a judgment against you, you may receive papers called "post-judgment discovery." Post-judgment discovery often includes a set of questions (called "interrogatories") to be answered and a list of documents (called "requests for production") to be sent to the creditor’s lawyer. It may also include "requests for admissions," which are a list of statements that you will need to admit or deny.

If you have a judgment against you and you receive post-judgment discovery, it is really important that you answer post-judgment discovery.  Many people end up having money taken from their bank accounts by mistake because they did not fill out and return post-judgment discovery telling their creditors that they do not own anything other than protected property, which cannot be taken to pay debt judgments. 

Garnishment is when a court orders money or property to be taken to pay a debt. After winning a judgment in a debt lawsuit, the creditor files a separate case against a third party who has your money (also called a "garnishee") and asks the court to issue a writ of garnishment. Most of the time, the garnishee is your bank or, sometimes, your employer. The creditor seeking to be paid is called the "garnishor" in the garnishment action. 

If you received a writ of garnishment, it is likely that your account is already frozen. 

For more info, read Garnishment in Debt Collection.

A "receiver" is a person appointed by the court to find and take money and property after a judgment in a debt lawsuit. A receiver can take personal property and money in bank accounts in order to pay the creditor. By law, a receiver is only permitted to take "nonexempt" (or unprotected) property. See Texas Civil Practice & Remedies Code 31.002.

For more on receivers, read Turnover Receivers and Debt Collection. 

Have government benefits and assistance direct deposited.

Many benefits such as social security, veteran's benefits, and unemployment, can be direct deposited into a bank account for your use.  If you use this direct deposit option, the bank must automatically protect two months worth of benefits and allow you to have access to those funds.

If you receive the same assistance in the form of a check, which you then deposit into a bank account, your account does not have the same automatic protection. So even though the income is exempt, the account may still be frozen, and you will have to file a Protected Property Claim Form and prove your right to have the funds released.   

Keep government benefits and other exempt money in separate accounts from nonexempt money. 

In addition to having benefits direct deposited into your account, you can also keep a separate account for any exempt funds like Social Security.  

If you keep a separate account for funds that you know qualify for a specific exemption from garnishment, it will be much easier to show that the account only contains funds that are exempt. 

If the exempt funds are mixed with nonexempt funds, you will have to prove to the court that the frozen funds came from the exempt sources in order to get them returned. This is a much more complex process, so keeping them separate makes it less likely a creditor will be able to take your exempt property.

Negotiate with creditors.

If you cannot afford a debt you owe and you receive unprotected income, consider contacting the creditor or receiver to set up a payment plan. Tell them how much you can afford to pay each month and see if they will allow you to pay something close to that amount. Before you agree, make sure you understand how much more you will have to pay, including any additional interest they may charge for a payment plan. If you agree to a payment plan with your creditor, be sure to get the agreement in writing.  

Note: If all of your income and property is exempt, you may be "judgment proof." In this situation, it may not be to your benefit to negotiate with creditors or a receiver. 

Instructions & Forms

Warning: The information and forms in this guide are not a substitute for the advice and help of a lawyer. Use our Legal Help Directory to search for a lawyer referral service, legal aid organization, or self-help center serving your area.

Certain federal and state laws, called “exemptions,” protect some kinds of money and property from being taken.  Exempt property includes most money and property that you need to live on: things like benefit income (from Social Security, the VA, unemployment, etc), your homestead, vehicles, and retirement income.

A list of what property is protected appears in the "Notice of Protected Property Rights" as well as the "Protected Property Claim Form." You should have received these papers from the creditor after the garnishment or receivership started. If you did not receive these forms, contact the court. 

You can also review the article on What Property Can Be Protected From Judgment Creditors? as well as Chapter 42 of the Texas Property Code to learn more about exempt property. 

Checklist Steps

1. Read these instructions and the Protected Property Claim Form's instructions carefully. It is important to understand what property has been taken and what property is exempt before you begin filling out the Claim Form.

2. Fill out the Protected Property Claim Form completely.

You should receive this form from the creditor shortly after a garnishment begins or a receiver is appointed. If you have not received this form within five days of your property being frozen or taken, you should immediately contact the court. 

The creditor should have completed the case information at the top of the claim form. If this was not completed, contact the court to get this information.

If you do not regularly check your email, do not include your email address on the form. The court will use this email address to contact you and send notices about hearings in your case. It is very important that you check your email regularly if you include an email address. 

When completing the form, check the boxes for any exempt property that has been taken by garnishment or a receiver. You can check as many boxes as necessary. If your frozen bank account has any money from exempt sources, make sure to check the boxes for those exemptions, even if there is nonexempt money in the same account.

Once you complete the entire Protected Property Claim Form, make a copy of your completed to keep for yourself.

You should also make a copy for every party listed in the "Interested Persons to Notify" section of the form if you plan to serve notice on them by mail. See Step 5 below for more on how to give notice.

File (turn in) your completed Protected Property Claim Form, including the Certificate of Service, with the court listed at the top.

You may turn in the Protected Property Claim Form in person, by mail, or by using the eFile system. If you use the eFile system, be sure to mark that the Protected Property Claim Form has sensitive data.

Turn in the claim form in as soon as possible. If you wait more than 14 days, your exempt property may be sold or released to the creditor. 

On the day that you turn in your completed Protected Property Claim Form to the court, you must mail or email copies of it to everyone listed in the section of the Protected Property Claim Form titled “Interested Persons to Notify.” The creditor should have filled in all of the contact information in this section. If this section is not filled out, you should contact the court to get the information.

Sending a copy of the claim form to each party is called "service," and you must confirm that you did this by signing the "Certificate of Service" part of the claim form. This is a very important step in the process. If you skip this step, the court may refuse to return your money or property.

The court should schedule a hearing within 10 days after it receives your completed Protected Property Claim Form to decide if your money or property is protected. The court will send you the date and time of the hearing at the mailing or email address you gave in your Protected Property Claim Form.

If you think the court has received your Protected Property Claim Form, but you have not been notified of the hearing date and time, contact the court immediately.

Do not miss your hearing! If you do not attend the hearing, the court may refuse to return your money or property.

At the hearing, you will need to tell the court what money or property has been frozen or taken and why it is protected under federal or state exemption laws.

You will need to bring documents showing that your property is protected and the value of your property. This includes papers like pay stubs, account statements, benefits letters from government agencies (like Social Security, VA, etc), divorce decree showing child or spousal support you receive, certificate of title if a vehicle has been taken.

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