Virginia’s weak laws allow debt collectors to push more families into poverty, but some legislators are trying to help.

As working families continue to struggle through a perfect storm of high inflation, high credit card interest rates, an ever-growing cascade of junk fees, and record-breaking consumer debt, a new report finds that Virginia is leaving these families high and dry.

The National Consumer Law Center (NCLC) report, No Fresh Start 2024: Will States Protect Families from Debt Collectors Seizing Wages and Bank Balances?, grades each state on its exemption laws–fundamental safeguards that protect family income and property from seizure by creditors, debt buyers, and debt collectors. In 2024, Virginia received a “D” rating; a decline from 2023, when Virginia received a “C” rating.

“State exemption laws provide critical protections for cars, work tools, gas money, and other basic essentials consumers need to remain in the workforce,” said Michael Best, senior attorney at the National Consumer Law Center and co-author of the report. “Exemption laws must be strong enough to protect families from poverty and allow families to recover financially after the collection of a debt.”

These protections are critical as many families struggle to pay for necessities, and as the report details, Virginia falls short of adequately protecting families in multiple areas, including:

• Preventing creditors from seizing so much of the person’s wages that the person is pushed below a living wage for a family; and
• Preserving a basic amount in a bank account so that the person has sufficient funds to pay essential costs such as rent, utilities, and groceries.

2025 Legislation Aimed at Improving Virginia’s Grade

The Virginia Poverty Law Center (VPLC) will support two key pieces of legislation, sponsored by Delegates Phil Hernandez and Carrie Coyner, in the upcoming 2025 Virginia General Assembly session that provide critical and reasonable financial protections for families and individuals struggling with debt. sponsored by Delegates Phil Hernandez and Carrie Coyner in the upcoming 2025 Virginia General Assembly session. These bills

Automatic Protection for Family Bank Accounts – Delegate Hernandez

Delegate Phil Hernandez’s proposed legislation will ensure that a minimum amount of funds in a family’s bank account is automatically protected from seizure when facing a debt lawsuit or bankruptcy. Under current law, families are often left without enough money to cover basic needs, such as food, housing, and medical care, when creditors seize all available funds to repay debts. This bill provides a safety net that will prevent families from falling into further financial crisis. Providing a clear, automatic exemption will also simplify the garnishment process for banks.

“Families shouldn’t have to make the impossible choice of feeding their children or paying off a debt,” said Delegate Hernandez. “This necessary bill will create new protections to safeguard funds that are needed for the necessities of life and prevent families from falling into a vicious cycle of poverty.”

Ending 100% Wage Liens for Tax Debts – Delegate Coyner

Delegate Carrie Coyner’s bill will address another major financial hardship by ending the practice of using tax liens to take 100% of a person’s wages. Virginia is the only state in the country that actively uses 100% tax liens. This legislation will establish a fair and balanced approach to tax debt repayment, ensuring that Virginians can meet their essential needs while resolving their obligations.

“Garnishing 100% of someone’s wages is not just impractical – it’s inhumane,” said Delegate Coyner. “This bill allows Virginians to pay their debts while maintaining their dignity and basic livelihood.”

A Path Toward Financial Stability for All Virginians

Virginia Poverty Law Center (VPLC) recognizes that debt-related challenges disproportionately affect low-income families, trapping them in cycles of poverty, as NCLC’s report makes clear. By supporting these bills, VPLC continues its mission to promote economic justice and financial security for all Virginians.

“These bills are about fairness, stability, and giving families a fighting chance,” said Jay Speer, Executive Director. “No family should be left without resources to survive, and no worker should lose their entire paycheck. We applaud Delegates Hernandez and Coyner for their leadership on these critical issues, and we thank NCLC for their critical research.”

VPLC urges the 2025 General Assembly to pass these bills to improve Virginia’s laws for families struggling with debt and protect families from unjust financial hardship.