Debtor's Rights

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If you have creditors calling, bills coming due and you are unable to pay, check the following information to see what you can do to help yourself.


You will not be thrown in jail because you can't pay your bills. Only acts such as intentionally writing bad checks, using credit you don't plan to repay, or not paying child support you are able to pay, are criminal*.

* If you have been charged with a crime and you are poor, you have a right to a court -appointed attorney


Kentucky Law protects some of your property and income from debt collectors. The following list applies to each debtor, so a married couple can double the amount which is "exempted" from creditors.

  • $5,000 equity in a home or burial plot, unless you voluntarily gave the creditor a lien which covers the home's total value.
  • $2,500 equity in a motor vehicle, unless you voluntarily gave a lien on the car for its total value.
  • $3,000 worth of furniture, clothing and household items**
  • $300 for tools of your trade
  • $3,000 of a farmer's tools, equipment, livestock, or poultry
  • Professionally prescribed health-aids

    ** If you borrowed money from a finance company and they had you list household furnishings that you already owned, that lender does not have the right to take those household items if you can't keep up with your payments. A lender can take a household item only if you borrowed the money for the purpose of buying the item.


Kentucky law and federal law allow you to keep, each week:

75% of your weekly take-home pay OR Thirty times the minimum wage ($217.50 as of July 2009), whichever is greater!

The rest may be garnished (taken) by court order, usually after a lawsuit and judgment against you.

HOWEVER, a court can order more of your take-home pay garnished to collect:

  • Child support
  • Court-ordered bankruptcy payments
  • Federal or state taxes

Some income cannot be garnished at all. The following kinds of income are totally protected:

  • Public Assistance (KTAP)
  • Social Security and SSI
  • Unemployment Insurance
  • Veterans' Benefits
  • Worker's compensation
  • Certain retirement and Disability benefits
  • Child support (except in some cases)

CAUTION! It is a good idea to keep exempt money in a separate bank account, not mixed with other funds (gifts, etc.) Ask your bank if they have an ETA account for direct deposit of federal benefits.

What if a Creditor Sues You?

Try to get legal advice right away. You might have a defense, or a claim against the creditor. If you cannot get an attorney, and there is no question that you owe the money, you may wish to simply ignore the suit, in which case the creditor will get a court order saying that you owe the money. You do not have to go to court. But if there is any dispute at all about the amount of money you owe, you should respond to the lawsuit. You can represent yourself if you need to, and you might be able to convince the judge or your point of view.

What if the Creditor Wins?

If you do not respond to a lawsuit, or you respond and the creditor wins, the creditor will get a judgment and take steps to collect the debt.

Notice - The creditor must give you a notice when it is taking any of your income or property. If you feel the creditor is not entitled to the property you can ask for a hearing.

Garnishing your take-home pay - The creditor can give your employer notice of the judgment and your employer will send part of your pay directly to the creditor. You need to check the paper sent to you, to make sure your employer is taking out the correct amount. Read more about wage garnishment.

Garnishing your bank account - The creditor can send your bank a copy of the judgment and garnish your account. The bank will freeze the amount in your account and send you a notice. Follow the instructions on the notice to get a hearing on whether the creditor can take that money. If you have exempt Income in your account, you will have to show the judge the amount of the exempt income, and the creditor will be allowed to take only any non-exempt funds. It is best to keep exempt income in a separate account so this is easy to prove to the judge.

Depositions - Creditors with a judgment have a right to ask you to go to their attorney's office and, under oath, describe your income and assets.

Will A Creditor Take Your House? Normally, no. An involuntary lien holder (a creditor who got a judgment and used it to get a lien on your house) must first try to collect the debt out of your possessions (money, personal property). If you don't have that much, then they may take legal steps to have your house sold. You would get a legal notice and chance to object, if they try to have your home sold. Usually, a creditor will put a lien on your home so that if you sell the house, it will get the judgment money at that time.

Exception: A mortgage company or other or voluntary lien holder may foreclose on your home if you fall behind in payments.

Life of a judgment - A judgment is good for 15 years and may be renewed.

Harassing Creditors - What can you do?

Creditors may call you at a reasonable time and politely discuss your debt with you. But obscene calls, threatening calls, and repeated calls are illegal. You may write to a creditor and tell them not to contact you any more about a debt. See: When Creditors Call, You Have Rights

Reviewed August 2009