No jail time in debt collection

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Dear Debt Adviser,
I am on disability and I have debt collection letters saying there are judgments against me. I was told I could go to jail because I can’t pay the debt back. I get a small Social Security check each month that barely covers my cost of living. This check gets deposited directly into my checking account each month. I was told these bill collectors can get a judgment and they can wipe out my bank account, which then would leave me homeless because I live in a government project and pay a low monthly rate.

I don’t own anything except a 1995, $400 car that needs work. I wish I had stocks, bonds or something to cash in so I could pay off some debts. I am also getting letters from lawyers saying they can help. But I can’t even afford a lawyer. Can you help and at least tell me what to do before they arrest me or make me homeless?

P.S. I have no one in my family that can help either. Thank you.
— Ray

Dear Ray,
You need do nothing before they arrest you or make you homeless. That is because they can’t legally do either. Debt collection is a necessary, though sometimes unpleasant, profession. Professional collectors have no use for bullies that threaten fictitious penalties. You didn’t say who told you that you might go to jail, but before I give you some suggestions, let me first set your mind at ease on one or two things. We do not have debtors’ prisons in the United States, and if a collector tells you that you are going to jail because of an unpaid debt, that person is just plain lying to you. If it was a well-meaning friend, they are misinformed about debt collection. Either way, rest assured, you will not be going to jail ever for an unpaid debt.

The next item I want to clear up is to say that your Social Security income is exempt from a garnishment or bank account levy except for cases where you owe the government money. What that means for you is that, unless your debt is government-related — back taxes to the IRS, for example — the collector cannot use a judgment to levy your bank account as long as you have only Social Security wages deposited into the account. The thing is that the court needs to know that the money in your account is solely from Social Security or they might approve an account levy that would take your funds.

Be sure to write a letter (certified mail, return receipt) to the collection attorney stating that you have a hardship, cannot pay the debt and that the only income you have and the only source of funds in your bank account is from Social Security. If you get a court summons, send or bring to the court a copy of the letter. To get some guidance on the details of this I suggest that you contact your local legal-aid office or ask the local bar association to refer you to a free, or pro bono, attorney.

If it was the collection agency rather than a misinformed friend that said you could go to jail and end up homeless, I’d consider asking the free attorney helping you if he or she believes you have a case to sue the collection agency for their illegal conduct. This may be more time and trouble than it is worth, but your attorney can best advise you. My concern is that you may be subject to repeated debt collection attempts unless you deal with this one decisively.

One last bit of advice. No more debts, please. When you use credit, you are borrowing from tomorrow’s income surplus for use today. Your income is fully committed at this point in your life, so instead of using credit, I’d rather see you set up a small savings plan for use in emergencies or for life’s little indulgences. You can get some good free help on establishing a budget that includes savings by contacting a nonprofit credit counseling affiliate of the National Foundation for Credit Counseling at 800-388-2227, or the Association of Independent Consumer Credit Counseling Agencies at 866-703-8787.

Good luck!

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