Credit card issuer can't garnish your Social Security check


Credit Smart
Credit Smart columnist Susan C. Keating
Susan C. Keating is the president and chief executive officer of the National Foundation for Credit Counseling. Prior to joining the NFCC, Keating spent 29 years in financial services. She was the highest ranking female CEO of a U.S. bank holding company, serving as president and chief executive of Allfirst Financial Inc., the largest U.S. holding of AIB Group. She currently serves on Bank of America's National Consumer Advisory Council and is a board member of the Council on Accreditation. Keating also participates in the Financial Regulation Reform Collaborative, a nonpartisan group committed to finding solutions for reforming financial services regulation.

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Dear Credit Smart,
My Social Security check is my only income. My credit card debt is harder and harder for me to make. Can the credit card company garnishee my Social Security check if I stop paying? – Barb


Dear Barb,
No, your Social Security check cannot be garnished for credit card debt. Credit card debt is unsecured debt; your Social Security income can be garnished for certain other debts, such as delinquent taxes and federal student loan debt, but not for unsecured debt.

Other types of income that are protected from garnishment include Supplemental Security Income benefits, veterans benefits, federal employee and civil service retirement benefits, and benefits administered by the Railroad Retirement Board.

Your protection from improper garnishment was strengthened by a change of U.S. Treasury Department rules enacted in 2011 designed to halt a once-common practice by debt collectors – using garnishment orders to freeze the bank accounts of debtors. Previously, banks presented with a garnishment order would freeze the entire account and then let the courts sort out how much of it was protected and how much could be seized by the collector.  The 2011 rule require banks to shield two months’ worth of protected deposits from garnishment. You must have your Social Security deposited electronically to qualify for this protection. The Consumer Financial Protection Bureau can provide further explanation of this protection.

I am not suggesting, however, that you simply stop making payments on your debt at this time. You do still owe your credit card company and even though it cannot garnish this income, it still may try to collect payments from you. This is especially true since you have been paying them regularly.

I would advise you to call your creditor. Explain your situation honestly and see if the card issuer can offer you some type of hardship program that will reduce your monthly obligation.  Be sure to communicate that your circumstances are not likely to change because you are on a fixed income, so you may need long-term help, depending on the amount of your debt. Point out that you have been a loyal customer and that you want to pay your debt if at all possible.

You should be aware that the creditor is likely to shut off your access to credit, which may be in your best interest anyway. The account will still be active, but you won’t be able to charge any more. Adding to your debt will not help the situation, even though it can be very tempting. Look at your monthly obligations and be sure that you can cover your basic needs with the money you have coming in without having to rely on your credit card.

You may need to make some difficult choices in areas that are more flexible. These include things like cable television, internet access, and telephone and cellphone packages.  Be sure you are taking advantage of any senior discounts available to you in these and other areas such as prescription drugs and food.

If you are not successful dealing with your creditor on your own, you can call a certified nonprofit credit counseling agency to help you. A counselor will go over your situation for free and help you come up with the best solution. These agencies have good working relationships with credit card companies and they may be able to negotiate a better deal than you can on your own.  Your initial consultation is free; if you and your counselor decide that a debt management plan to pay off your debt will work for you, there may be nominal fees for that service. Most agencies have a policy of reducing or even waiving fees based on individual situations. You can find a reputable company through the National Foundation for Credit Counseling, and the Federal Trade Commission offers advice on choosing a counselor.

Remember to always use your credit smarts!

See related: Video: the road to wage garnishment, 5 reasons you need good credit in retirement, How garnishmenet works, and how to avoid it

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Published: May 14, 2016

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Updated: 10-28-2016

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