A debtor’s rights include the right to have a creditor adhere to the procedures provided by law for the collection of debts. The procedural limitations placed on the debt collection efforts of creditors are usually designed to protect the rights of the debtor and avoid abuses by creditors.
State laws protect certain property from the reach of creditors. These exemptions, sometimes called homestead exemptions, are usually determined by type of property or by value. For example, one state’s statute may exempt the debtor’s personal property up to a value of $5000 from creditor collection efforts, while another may exempt a single residence without limitation on value. These state laws vary very greatly from state to state and may become extremely important if the debtor is forced to file for bankruptcy.
State exemptions do not apply to federal liens such as federal tax liens. Federal tax liens are enforceable against a purchaser of the taxpayer’s real property. Federal statutes also exempt certain property of the debtor. For example, social security and pension benefits are exempt from creditor’s claims.
As already explained, federal and state statutes protect debtors against unlawful debt collection practices, and creditors often must follow technical procedures to collect a debt according to law. Failure to follow these legal technicalities affects the creditor’s ability to enforce its claim against the debtor.