Pending case over blocked legislation could determine whether thousands of Michigan families gain long-overdue safeguards from debt collectors
WASHINGTON – During an affordability crisis, families across the nation are reeling from high inflation, record debt, and a surge in debt collection lawsuits. State exemption laws can provide a critical safeguard. But a National Consumer Law Center (NCLC) report finds that Michigan still fails to meet any one of the five basic standards for consumer protection. A case before Michigan’s Supreme Court, however, has the potential to change this.
No Fresh Start 2025: Will States Protect Families from Wage and Asset Seizures as Debt Levels Soar? grades each state on its exemption laws, which protect income and property from seizure by creditors, debt buyers, and the debt collectors they hire.
“Michigan’s current laws allow debt collectors to take nearly everything a family has, including completely draining their bank accounts and seizing Earned Income Tax Credits intended to bolster working families,” said Libby Benton, Director of the Michigan Poverty Law Program (MPLP).
Michigan’s exemption laws are so archaic and inadequate that state law still protects 10 sheep, two cows, five swine, 100 hens, five roosters, and the hay or grain to feed them for six months, while only securing a home worth $3,500. In a case to be argued next week, the Michigan Supreme Court has an opportunity to update the exemptions and provide critical protections to low-income Michiganders.
During the 2023-2024 legislative session, the Michigan legislature passed legislation (HB 4900 and HB 4901) that would have significantly improved Michigan's exemptions. The legislation would:
- Increase protected wages to ensure families can meet basic living expenses
- Safeguard a portion of bank account balances from seizure
- Raise exemptions for homes, vehicles, and essential household goods
- Protect Earned Income Tax Credit payments from garnishment
- Automatically adjust protections for inflation over time
Unfortunately, these bills were among nine pieces of legislation that were, inexplicably, not presented to the Governor for her signature before the end of that legislative session. The Michigan Senate has successfully sued to compel the current Michigan House to present the bills, but the House has appealed this decision to the Michigan Supreme Court.
MPLP and NCLC filed an amicus brief in the case, urging the Court to deny the pending appeal, which would allow the legislation to be presented to the Governor and take effect—delivering immediate financial relief to Michigan families. In the brief, MPLP and NCLC stressed that the harms of the current laws are both widespread and disproportionate. Tens of thousands of garnishment orders are issued annually in Michigan, and communities of color are significantly more likely to face debt collection and wage seizure actions. The case, Senate v. House, is scheduled for oral argument on May 6.
“By allowing these bills to be presented to the Governor, Michigan’s Supreme Court can prevent creditors and debt buyers from pushing families into poverty,” said Michael Best, director of State Advocacy at the National Consumer Law Center and co-author of the report. “These protections help families regain their financial footing and contribute to the economy, keeping workers in the workforce, reducing the demand on funds for unemployment compensation and social services, and keeping money in local communities.”
Related Resources
- No Fresh Start 2024: Will States Protect Families from Debt Collectors Seizing Wages and Bank Balances?
- Model Family Financial Protection Act
- State Debt Collection Fact Sheets
- Fair Debt Collection and Collection Actions (legal treatises):
- Surviving Debt (consumer book) and Consumer Debt Advice (free articles)