Creditors can’t touch your Social Security

3 min read

Dear Debt Adviser,
I am a 72-year-old female. I lost my job, but I do receive Social Security benefits. I have about $42,000 in credit card debt. I talked to a lawyer’s office about filing for bankruptcy. They said that because of my age, there was no need to file bankruptcy. They also said to just stop making payments on my credit cards since I had no income except Social Security. They said my Social Security benefits cannot be touched for payments on the credit cards. I am two months behind on all my credit card debt now. Was the lawyer right or am I going to be in big trouble with the credit card companies? Help! Thank you for listening to me.
— Vonda

Dear Vonda,
Your age? There is no age limit in debt collection or bankruptcy court! The lawyer may have meant that as a septuagenarian, you may not need to ever access credit, rent an apartment, get insurance or look for a job again. Unless you have one foot on a banana peel and the other in the grave, I’d reconsider this bit of advice, otherwise the lawyer was correct. But so were your instincts. If you stop paying on your debt, you will be in big trouble with the credit card companies. What you received was strict legal advice, just not sound personal advice! Confused? I don’t blame you. Let me try to help.

If you have no assets and only Social Security benefits as income, your creditors have limited options to get their money. They can’t garnish your Social Security income and they can’t levy your bank account as long as it only has Social Security income in it. However, you owe a substantial amount of credit card debt and the card companies are not going to give up easily in attempting to collect and using what remaining leverage they have.

Three things I would like you to keep in mind if you are leaning toward following the lawyer’s advice. First, if you own a home or have any other assets, the card company can sue you in court for payment of the debt. Because the credit card debt is yours and you do owe it, the card issuer will likely win its case in court and could be granted a judgment that can be used to place a lien against your home or other real property. The lien will not force you to sell your property. But if and when the property is sold, even by your heirs, the lien will be satisfied at the sale.

Second, if your Social Security benefits are deposited in a bank account where other money is held, the card company can use a court judgment to get at the money in your account. It would then be up to you to prove that the Social Security benefits in the account cannot be taken. The bank is not responsible for knowing that money cannot be levied.

Third, even if you have no home or assets, your creditors can sue you. They can get a judgment and then sell and resell your credit card debt to an array of increasingly aggressive debt collectors. These collectors will do their best to make your life so unpleasant that you will pay something to make them go away.

Should you be unable to pay your debt and you don’t want to go the bankruptcy route, my suggestion is to have the lawyer write a letter to each of the credit card companies where you have an account letting them know that any and all debt collection activity must be done through the lawyer. The Fair Debt Collection Practices Act states that if the company receives such a letter from your lawyer, they may not contact you. And believe me, you don’t want to be dealing with those phone calls. The lawyer will probably charge you for this service, but it may be cheaper than a bankruptcy.

If you could realistically afford to make payments on what you owe, you might consider contacting a qualified, nonprofit credit counseling organization. Your counselor will review your financial situation and let you know if, with some help from your creditors, you would be able to set up a repayment plan on your credit card debt.

Good luck!

Ask the adviser

To ask a question of the Debt Adviser, go to the “Ask the Experts” page and select “Debt” as the topic. Read more Debt Adviser columns and more stories about debt management.

Bankrate’s content, including the guidance of its advice-and-expert columns and this Web site, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this Web site is governed by Bankrate’s Terms of Use.