DEFINITION of 'Waiver Of Exemption'

A provision in a consumer credit contract or loan agreement that permitted creditors to seize or threaten to seize specific possessions or property (typically those considered necessities) even if state law treated them as exempt from seizure. A debtor who signed a waiver of exemption made such exempt property available to a creditor who obtained a judgment to satisfy a debt. Such waivers of exemption are no longer permissible under the Federal Trade Commission Rule.

BREAKING DOWN 'Waiver Of Exemption'

An unsecured creditor who obtains a judgment cannot seize exempt property. However, the security interest of a lender who has a valid interest in property is unaffected, even if the property is exempt by state law, although in this case another FTC Rule provision that prohibits the taking of a security interest in property defined as household goods should be considered.

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