what is a waiver of exemption 
a waiver of exemption was a provision in a consumer credit contract or loan agreement that allowed creditors to seize or threaten the seizure of specific personal possessions or property the property attached to the loan could include a borrower s primary place of residence lenders could enact this clause even if state law held the property exempt from seizure the federal trade commission ftc banned these practices under the credit practices rule of 1985 1understanding a waiver of exemptionbefore 1985 waivers of exemption were common in credit contracts their inclusion was a way for creditors to secure a loan that may not have been available without the waiver clause in case of a default the provision provided the lender an avenue to recoup expenses by selling the property listed as securing the loan every u s state exempts some personal property from seizure in a civil judgment generally property considered necessities of life such as an individual s primary home car and necessary household goods like a refrigerator or clothing are exempt from seizure any borrower who signed a waiver of exemption made such exempt property available to a creditor who obtained a judgment to satisfy a debt one exemption to the ban on property seizure is a home mortgage state personal property laws do not apply to mortgage loans as a creditor always retains the right to foreclose on the property in the event of a default 1 instead these laws are meant to prohibit smaller lenders such as those in the furniture appliance auto dealership or department store businesses from attaching a lien against the debtor s home ftc regulation of wavier of exemption practicesthe ftc offers the following example of a typical waiver clause the ftc deemed such waivers of exemption unfair to consumers in addition to being difficult to understand the 1985 prohibition did not specifically ban any forms of collateral instead mandating that creditors may not contravene or go against the order of state law that governs property exemptions 1further the credit practices rule of 1985 separately prohibited creditors from attaching liens to household goods considered necessary including appliances clothing and linens and items deemed of more personal than monetary value such as family photos and wedding rings the rule does not include household goods purchased explicitly with a loan in which case the creditor who made the loan has the right to repossess after a default 2as an example imagine you bought a new bedroom suite of furniture from a local furniture store using a store financing option the store may repossess the furniture purchased with the loan however if you stop paying the loan the store may not seize your car or clothing while the ftc outlawing waivers of exemption means some of your personal property is safe for seizure the other potential repercussions of defaulting on a loan are still best avoided if you re struggling with your debt payments a debt relief company or credit counseling agency may be able to help 