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Elderly father's Social Security income likely safe from garnishment

By

Opening Credits
Columnist Erica Sandberg
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.

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Question for the CreditCards.com expert

Dear Opening Credits,
My elderly father got caught up in the "You are a winner in our contest" scams, and unfortunately, spent all their money. So sad. Now, he has Alzheimer's, my mom is legally blind and I have had to move them with me. Both are now on Social Security. As this is their only income, they have had to default on a credit line at their bank. I read your answer to another man that Social Security income cannot be garnished to satisfy a credit card debt. How about credit lines from a bank? Thank you so much for taking a bit of your time to answer this question for me. -- Michelle

Answer for the CreditCards.com expert

Dear Michelle,
First, I must say how sorry I am that this is occurring to your family. When health and financial problems merge, the pressure is often enormous.

Unfortunately, though, what happened to your father is not uncommon. I spoke with Harry Margolis, a Boston-based elder law attorney and founder of ElderLawAnswers.com, about your situation and the reasons that older people can be especially susceptible to fraud. "Seniors are frequent targets of scams because they have some money. They've had a lifetime to accumulate savings," says Margolis. "When you get up into your later years, there is a chance of losing some mental faculties, and that puts you at greater risk of getting taken advantage of."

So on to your question: Is your dad's Social Security income at risk of being garnished? The answer is that it's probably safe. While it seems he did borrow some money from the bank to cover his losses, when it comes to the law and collecting on that debt, a credit line is no different from a credit purchase. It's an unsecured loan. This means there is no collateral (security) that can be taken if the loan or line of credit is not repaid.

In fact, the only way for a creditor to legally claim owed unsecured funds from a debtor is by suing the person in a court of law and winning the case. At that point, the judge may allow the creditor to garnish allowable wages, as well as place a lien on real estate and even claim personal property or cash in bank accounts (called a levy). 

But what happens if the individual has no money or assets that can be attached to go toward the debt? Well, the judgment creditor can't do much. You see, some assets are exempt from legal claims and seizure. States have varying laws dictate what is and isn't exempt, but here is a good list of the type of income that is generally protected from a judgment creditor:

  • Social Security
  • Public assistance benefits
  • Supplemental Security Income
  • Social Security Disability
  • Veteran's benefits
  • Child and spousal support payments
  • Worker's compensation
  • Unemployment insurance

It sounds like your dad is pretty tapped out, but just in case he has a bit left in his bank account, that money may be exempt as well.

In short, it looks like your dad is judgment proof. If he has no assets that can go toward the amount owed, then, says Margolis, "he can walk away from his debt." You did not mention whether or not he's been getting collection calls, but if so he -- or you, on his behalf -- can send a cease and desist letter to end that activity. If your dad would like to pay the debt back, that's his choice, but I urge you to help him figure out how much he can really afford to send each month. It may be a token payment, but it may help ease his mind. I don't know how severe his Alzheimer's has become, but many people feel better psychologically when they are doing their best to make good on a debt.

Now, regarding that scam, if you truly believe it was an illegal operation, I want you to report them to the Federal Trade Commission as soon as possible. You don't want others falling into the trap too. It is horrible how some people take advantage of those who are overly hopeful or judgment impaired.

See related: 5 key federal laws that help cardholders, Tips for dealing with debt collection calls, Debt collection sample letters, Consumer debt statistics, What wage garnishment is and how it works

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Published: June 9, 2010


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