Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also writes regularly for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs. See her website SallyHerigstad.com for more personal finance tips and free budgeting worksheets. Ask Sally a question, or read her previous answers in the To Her Credit archive
Dear To Her Credit,
I worked and lived in Oregon. I was fired last June. I collect
Oregon unemployment and Social Security benefits. Can either be garnished for credit
card and hospital bills? -- Jane
The short answer is "no." Most creditors cannot
garnish either unemployment or Social Security benefits. Even if they could, by
the time you take an exemption for basic living expenses from your benefits,
there likely wouldn't be anything left for them to take.
No one can directly
garnish your Social Security check.
However, in the past, once that money was in your bank account, it was up to
you to prove which funds came from where and to prevent your benefits from
being taken or try to get them back. Many people with no financial backup plan
found themselves temporarily penniless while they sorted it all out.
Thanks to new federal regulations, as of May 2011, the
burden has shifted from you to your bank. Before the bank (or other financial
institution) freezes your account, it must make sure electronically deposited
benefit payments are left untouched and that you can still access them.
One catch is the phrase "electronically
deposited." In the past, I've told people in any danger of having an
account garnished not to have
benefits and other types of income deposited electronically. It was better for
them to physically get a check and either cash it or to make sure the bank knew
it was protected income.
The game has changed. If you get benefits in the mail and
take the check to the bank and deposit it, you're not protected by the new law.
That's because the electronic deposit is tagged electronically by the bank. It
doesn't work for checks. My advice now is to always have exempt benefits electronically
deposited into your account.
With your benefits safe, you can relax, step back and take a
look at your financial picture. The credit card company and the hospital may
not get your bank account, but that doesn't mean your debts go away. Debts are
like weeds; the more you ignore them, the faster they grow.
You no doubt have other hopes and goals that take money,
too, whether it's sprucing up the kitchen, visiting family or just the security
of having backup cash in the bank. People sometimes focus solely on debts when they
think about finances. That's a mistake. We all need positive things to motivate
us to keep moving forward!
If your health permits, try to find a way to make a better
income. You must be looking for work to be collecting unemployment benefits.
It's a tough economy, but even now people are finding jobs. If you can't find a
job, consider offering a service or selling something. Surprisingly, it's still
hard to find people for simple projects.
Halfway between a regular job and striking out on your own
is the option of temporary work. These can be seasonal, but more and more jobs
are offered on a three-month contract as a matter of course. If you widen your
job search scope, you'll increase your odds of finding something soon.
Unless your total debt is very high -- probably over $50,000
in your case -- I don't recommend bankruptcy. Your debt appears to be
uncollectible, but to file for bankruptcy, you have to pay legal and trustee
fees. The cost in time and money is too high, especially when you have other
Have you applied for charity help with your hospital bill? Hospitals
routinely write off bills, based on the income level of patients. It's not
going to happen unless you ask, though, and you should ask before too much time
goes by. Go to the patient accounts department and ask if you can apply for
financial assistance. If you have no assets and are living on nothing but
government benefits, you should qualify for help.
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