Vermont Debt Collection Laws: The 85% Consumer-Debt Shield, and a Medical-Debt Ban That Is Not Actually Law

Before a Vermont creditor can touch your paycheck, it has to sue you, get a judgment, and then ask a court for a trustee process order against your earnings, a process that requires an actual hearing, not just a filed writ. Most debt lawsuits end in a default judgment because the person sued never answered, so responding to the summons is the highest-value move available. Once a judgment exists, Vermont protects more of your paycheck than almost any neighboring state, and protects even more if the debt came from a consumer credit transaction. One thing Vermont law does not currently do, despite what several consumer-advocacy sites claim, is ban wage garnishment for medical debt outright.

Wage Garnishment in Vermont: One of the Most Protective Formulas Around

Vermont's trustee-process statute, 12 V.S.A. 3170(b), protects the GREATER of two numbers, not the lesser, which is the opposite structure from the federal formula and most state formulas built on it. For an ordinary judgment, the exempt amount is 75% of weekly disposable earnings or 30 times the federal minimum hourly wage, whichever is more, meaning no more than 25% can ever be taken. For a debt that arose from a consumer credit transaction specifically, the exemption climbs to 85% of weekly disposable earnings or 40 times the federal minimum wage, capping what a creditor can take at 15%.

Vermont adds a categorical bar on top of the formula: 3170(a) says a court cannot issue a trustee-process order against a debtor's earnings at all if that debtor received public assistance from Vermont's Department for Children and Families or the Department of Vermont Health Access within the two months before the order. Firing protection is broad as well. Under 12 V.S.A. 3172, no employee may be discharged because of trustee process issued against earnings, with no one-debt limit the way federal law has, and a discharge within 60 days of the trustee process being served is presumed retaliatory, a presumption the employer has to overcome.

Vermont's own tax collector operates under a statute that does not say one thing clearly, so read this one carefully rather than banking on the better number. Under 32 V.S.A. 3208(a), the Commissioner of Taxes may garnish a taxpayer's earnings for unpaid state tax subject to the exemptions provided in 12 V.S.A. 3170(a) and (b)(1), which is the ordinary 75% or 30-times rule that leaves up to 25% collectible. But subsection (g)(2) lists, among the issues a taxpayer may raise at the hearing, whether the garnishment exceeds an exemption amount of 80% of weekly disposable earnings or 40 times the federal minimum wage, and subsection (j)(2) then ties the stop-withholding trigger back to 12 V.S.A. 3170(a) and (b)(1) again. The statute points at two different figures and no Vermont authority resolving them was found, so the 80% floor is an argument to make at the hearing, not a settled entitlement, and Vermont's tax levy cannot safely be described as more protective than the general rule. A 30-day advance notice and a 15-day window to request a hearing apply before that levy begins.

On bank accounts, Vermont protects $700 in deposits automatically under 12 V.S.A. 2740(15), plus a $400 general wildcard exemption that can be stacked with up to $7,000 of unused motor vehicle, tools-of-trade, jewelry, and household-goods exemption amounts under 2740(7), giving a debtor real flexibility in choosing what to protect.

The Medical-Debt Ban That Was Never Enacted

A number of consumer sites describe Vermont as barring courts from garnishing wages or attaching property over medical debt starting July 1, 2025. That claim traces back to a bill, S.83, titled protections against medical debt, that was never found enacted in this research. What Vermont does have is a set of medical-debt statutes that predate 2025, plus one genuinely new 2025 provision.

18 V.S.A. 9485 bars a large health care facility or medical debt collector from reporting any portion of a medical debt to a credit reporting agency, and bars selling medical debt except to a 501(c)(3) organization for the purpose of abolishing it through cancellation; 18 V.S.A. 9486 voids any attempt to waive those protections. Both were added by 2021, No. 119 (Adj. Sess.), effective July 1, 2022, so those protections are three years older than the 2025 act they are often credited to. Act 21 of 2025 amended only the reporting clause of 9485 and did not touch 9486.

Act 21's own operative addition works at the credit bureau rather than at the hospital. 9 V.S.A. 2466d, effective July 1, 2025, provides that a credit reporting agency shall not report or maintain in a consumer's file any information relating to a medical debt, whoever furnished it, using a broad definition of medical debt that covers dental, behavioral health, prescription drug, and durable medical equipment obligations while excluding veterinary bills, general-purpose credit card and line-of-credit balances, and secured debt. Act 21 also created a $1 million state fund to purchase and cancel medical debt. None of that is a garnishment ban. If you owe medical debt in Vermont, the ordinary wage-garnishment rules above still apply to it, and you should not rely on a categorical medical-debt shield that current Vermont law does not provide.

How Long Can You Be Sued, and the Fourteen-Year Note

Vermont's general civil statute of limitations is unified rather than split by debt type: 12 V.S.A. 511 gives six years for a civil action generally, covering written contracts, oral contracts, and open accounts alike, so there is no separate, shorter period for unwritten debt the way many states have. Sealed instruments get eight years under 12 V.S.A. 507.

Promissory notes have their own limitations section in the UCC: 9A V.S.A. 3-118(a) says an action to enforce the obligation to pay a note payable at a definite time must be commenced within six years after the stated due date, or within six years after an accelerated due date. An older provision, 12 V.S.A. 508, gives 14 years for an action on a promissory note «signed in the presence of an attesting witness». The two do not sit comfortably together. 3-118 was added by 1993, No. 158 (Adj. Sess.), effective January 1, 1995, it is the instrument-specific limitations rule for negotiable notes, and it states its six-year period without carving out witnessed notes, which is the ordinary signal that a later, more specific enactment displaces an older general one. No Vermont decision resolving the conflict was found. Treat the 14-year period as a live argument a creditor may raise, not as a rule you can plan around, and get a lawyer's read before conceding that an old witnessed note is still enforceable.

Revival works two ways in Vermont. 12 V.S.A. 591 requires a new promise or acknowledgment to be a writing signed by the debtor. But 12 V.S.A. 592 separately preserves the common-law rule that part payment of principal or interest restarts the clock on its own, without a signed writing. There is a real evidentiary catch, though: an endorsement or memorandum of a payment written on the note itself is not sufficient proof of that payment unless it is in the payer's own handwriting. And 12 V.S.A. 593 limits the effect of a payment or acknowledgment made by one of several joint debtors, it does not bind the others.

Car Repossession in Vermont

Vermont enacted the standard UCC self-help rule at 9A V.S.A. 9-609: after default, a secured lender may repossess without going to court as long as it does not breach the peace. No statutory pre-repossession cure or advance-notice requirement for motor vehicle retail installment contracts was confirmed this session; Vermont's separate consumer-installment-sales statutes were not exhaustively checked, so treat the absence of a cure right as likely rather than certain until you confirm it directly. The uniform commercially-reasonable-sale and deficiency rules apply after repossession, the same baseline other UCC states use.

If You Are Being Garnished or Sued in Vermont

If you are served with a debt lawsuit in Vermont, answer it. A default judgment opens every collection tool available and forfeits defenses, including an expired statute of limitations, that a court will not raise on its own. If a trustee-process order is sought against your wages, remember you are entitled to a hearing, and check whether you received Vermont public assistance in the two preceding months, which can bar the order outright. Do not assume medical debt is off-limits to garnishment in Vermont; it is not, under current law. And if the debts are piling up faster than any single fix can resolve, bankruptcy's automatic stay halts collection while the bigger financial picture gets sorted out.

Information last verified on 2026-09-02. This article has not yet been reviewed by a licensed lawyer.

Related Resources

For the national picture, see debt collection laws by state, statute of limitations on debt, how to stop wage garnishment, and car repossession laws. Social Security and other federal benefits have their own protection rules, covered in can Social Security be garnished. For deadlines on other Vermont claim types, see the Vermont statute of limitations. Child support garnishment is a separate, higher-priority process, covered in Vermont child support laws. If the debts themselves have become unmanageable, Vermont bankruptcy explains the state's exemptions.

---

Last updated: 2026-09-02.

More Vermont Laws

• Vermont Final Paycheck Laws
• Vermont Statute of Limitations
• Vermont Unclaimed Property