Is my social security and pension exempt from debt collectors garnishing?
I was forcibly retired last year and am paying 8 credit card bills -1 in collection - with an income of ss and pension only. I can't do it anymore. What do i do?
Is my ss and pension exempt?
—elliot
Short answer
Your social security income cannot be garnished at the source, and most pensions are exempt from garnishment too. A collector would first have to sue you and get a judgment entered in court. The risk that is left after that is a bank levy, on the money once it is sitting in your bank account.
Key points on this page
- Social security cannot be garnished at the source. Most pensions are exempt from garnishment as well.
- Nothing can reach your money until a creditor sues you and a judgment is entered in court.
- The remaining exposure is a bank levy, because the funds lose their protection in the eyes of a collector once they are on deposit.
- What a judgment creditor can reach, meaning bank funds, wages, personal property and a car, is set by your state exemption laws. The amount of protection you have may surprise you.
- Before it goes that far, weigh the alternatives: a lower fixed payment through credit counseling if about 2 percent of your combined balances is affordable, settling for less if you can pool roughly half your balances within 36 months, or chapter 7, which can cost under 2,000 dollars and removes the risk of suit, levy, garnishment and liens.
- Some people on a protected fixed income stop paying and accept whatever comes, because their income and property are already exempt. HELPS assists seniors and people receiving disability or VA benefits.
It sounds like you are asking what will happen if you stopped paying on all, or maybe just the account you already have in collections. The quick answer is that your social security income cannot be garnished at the source, and most pensions are exempt from garnishment too. You would first have to be sued, and a judgment entered in court, before there is any risk to your money from a debt collector. And what risk there is, given the sources of the income, would be when that money is on deposit in your bank account, so in the form of a bank levy.
If your situation reaches a point where you have to be concerned about how a debt collector will go about trying to collect on a judgment, you would then look to how much of your stuff (money in bank account, wages, personal property, car) is protected by state law. The amount of protection you have from creditors in your state may surprise you.
What state do you live in?
Bank Account and Wages – Limiting Your Risk from Debt Collectors
Before you react to how much risk you have if a creditor sues you in order to get paid, consider whether that can be avoided. Your not able to pay all 8 credit card debts today, so something has to give.
What if your credit card payment could be lowered, and fixed at a more affordable monthly amount?
Add up all of your credit card bills and then calculate two percent of that. Is that two percent much lower than what you are paying out to all 8 cards today? If it is, you are paying higher interest rates. If those rates are lowered (and fixed), would you be able to pay that amount consistently on your fixed income? If yes, read through the credit counseling section of my debt relief guide.
If roughly 2% of your consolidated credit card balances is out of the question, what about negotiating lower balance payoffs? Your credit card debts can be settle for less than what you owe once they reach a certain level of delinquency. If you are not making monthly payments to your credit cards, and saving up all the money you can instead, how long would it take you to pool together about half of your credit card totals?
If your answer is less than 36 months, settling these credit card bills may be the answer to avoid bankruptcy. Keep in mind that some creditors will accept settlement far lower than 50%. The review post about what major credit card lenders settle for is fairly accurate. Use that as a beginning guide to how much money you will need to settle with your banks.
You can post a list of your different creditors in the comment section below, with the balances as of today, and I can offer feedback about negotiation targets, timing, and prioritizing creditors who are the most likely to sue. Settling with the right creditors early can limit your risk of bank levy and property liens.
Put the Debt Behind You with Chapter 7 Bankruptcy
While bankruptcy is something most people want to avoid at all costs, I usually find they have not assessed the costs and benefits. While we talk about your credit card bills being affordable with credit counseling, or by settling for less above, chapter 7 bankruptcy is typically the ultimate in affordability.
Chapter 7 could cost you less than 2k from start to finish (I have seen costs less than 1k). Using bankruptcy you are able to discharge those credit card debts (and other bills), and once discharged, you remove any and all risk of being sued, or any type of bank levy, garnishment, and property liens.
You have to qualify for chapter 7 bankruptcy using an income means test specific to your state. And just like there are state exemption laws that protect you from debt collectors, there are state exemptions for what you are allowed to keep in a chapter 7 bankruptcy. If your stuff is valued at more than the exemptions in your state, you may look to a chapter 13 bankruptcy where you repay some, or all of the debt, over probably 5 years. But when it comes to people having to consider chapter 13, I have often found debt settlement to be a better alternative.
What if you just didn’t pay, and did nothing?
Some folks with too many bills, and not enough income and assets (such as being on fixed income from disability and social security), will stop making payments all together, and wait for whatever comes. If sued, and a court judgment entered, they already know they are not at risk because; their car and other personal belongings are protected by state law; they are not working in order to be garnished; wages are low enough in their state to be protected; live in a state where wage garnishment is not allowed; and funds like social security that are exempt are the only moneys deposited into their bank account.
Some people may feel that doing nothing is better than filing for bankruptcy, and there are many times I will agree. Check out the above interview I did with Eric Olsen, Executive director for HELPS. Eric and his team are available to help seniors, and those receiving disability and VA benefits, in order to protect themselves from all manner of debt collection:
This was a pretty long winded answer to a short question. My goal with this page is to bring the state exemptions from extra ordinary debt collection into focus. Anyone with questions or concerns about this topic can post in the comment section below. Please include the state you live in.
Need some personalized help?
I do offer a no cost initial consult to anyone trying to get their bearings on what to do about their particular situation. You can schedule the call using the Get Help tab at the top of this page.
I can usually offer actionable feedback in a brief call once I know the details of your situation.
You can post in the comments below anonymously, which I answer daily.
You can post in the comments of any of my YouTube videos.
About Michael BoveeMichael started CRN in 2004 with a mission to provide people in need with detailed debt and credit help and education. Michael has participated as an expert panelist in federal consumer protection rule making, collaborated on state law changes governing debt consolidation, has worked as an expert witness in court matters related to the debt relief industry. He is available to speak with you about your financial struggle and helps people resolve their debt problems daily.
My wife and I are already in bankruptcy In the 18 months since becoming bankrupt we have acquired 5 credit cards with about 10 000. total each consisting of about 2000 each We were paying these with her retirment account but it is about to be deleted She is 75 andI am 81 and both of us have health problems Her source of income will soon be only 1582.00 .mine is 1282.00 with a small pension of 964..00
The attorney who we used says he will not deal with the problem
We live in North Carolina we have about 40 k equity in a house that is in both our names
.Are we judgment proof
Your comments will be appeciated
North Carolina provides for up to $60,000 of home value exemption in certain elder situations (35k exemption otherwise). I would contact a low income legal aid office, or an experienced debt collection defense attorney in NC to find out if you meet the guideline for the extra protection.
Some creditors, and even debt buyers, are going to consider you uncollectable. Others will see the home as an asset and may push collections. Who are the creditors you owe?
In my name Discover 1100.00 capital one 1900.00 Amazon store card700.00
In my wife’s name capital one 1900.00 sycrony 1700.00
Barclays 1900.00
Capital One sues indiscriminately from what I see, and Synchrony sells debt to buyers who may see the mortgage being paid as an asset even when your equity may be exempt.
Many of the debt buyers you may come into contact with use sophisticated collection tools that can miss your being uncollectable. Post an update with any collectors you hear from and I can offer tips along the way.
Hi, I really need your help. My mom, who is 80 years old just got served from Capital One/Moore law group for $4156. She only has a social security income of $608 and owns nothing.
What should I do?
I want to call the Moore Law Group and offer them a deal. Like $1500.
Can they go after her if she only has Social Security?? Please help!!!
Thank you
I moved your comment to this page where I cover situations such as what your mom has going. There is nothing Capital One can do to touch her Social Security benefits. But there are other ways for creditors to enforce judgments. I know you said she owns nothing, but what state are you in?
Moore Law Group will be unlikely to accept anything less than 50% of the lawsuit amount. If your goal is to settle this debt, can you raise a bit more money?
Hello, I’m 58, single, on S.S. Disability permanently and have no personal property in my name. I receive $877.00 per month and have it put into my bank account. I have no other income. I have credit card debts amounting to $12000.00 I’ve been paying on time monthly but can no longer make any headway in seeing them get closer to paying any one of them off in a timely manor. My debts are 6,000. to Cirrus Master Card/Capital One MasterCard for 2000./ A Kroger Visa card for $2000. and a Barclay MasterCard for $2000., I can’t pay these down. I have to stop paying on them and only use my 977,00 per month to live on. I keep using my disability income to make payments on them all and in turn, have to use the cards again to pay my bills and have money to live on for medications. food. transportation fees etc. What am I exempt from if I were to be sued for not making payment to these companies any longer?
Should I look at Chapter 7 bankruptcy or a debt consolidation counselor? I’m thinking Chapter 7 bankruptcy because if I have to make monthly payments to the creditors, I will not have any money to live on. Help please. Thank you in advance for your guidance. Sincerely, Cindy
Your exemptions from judgment creditors are state specific. What state are you in?
Based on what you shared I would not choose debt consolidation with a credit counselor. While consolidation could help with a fixed lower monthly payment, it would not offer enough relief.
Look into chapter 7 bankruptcy. It will provide immediate relief if you qualify. Read my article about how to find the right bankruptcy attorney for you. Because of the fixed income and straight forward situation, yours might be a scenario where you focus on the most affordable attorney. You might want to look into whether their is a nearby low income legal aid office assisting with chapter 7 filings.
I live in Troy, Missouri. If I stop paying on the credit cards, do I wait for the credit card companies to contact me to reduce the amount they would settle for? Maybe I should start saving the 400.00 that I divide up to keep making small payment instead of defaulting completely. If I save that each month, and the creditors would reduce the amount they would settle for, I could pay them off one at a time but very slowly. I could pay off the 3 c.cards that are each 2000.00 in approx. 15 months. Then I could start working of the 6000.00 to Walmart MasterCard. Does that sound do able? I want to get this interest to stop as soon as possible that’s what is eating me alive. What do I say to the credit company to get the interest to stop accumulating now. If I just let it go till they are ready to settle for less, I’m fearful of how much interest it will come to in the end. Do you know of a company in my area , that you could suggest, that works with settling debts for low income? I want to thank you so much for your promptness, and guidance with this matter. You are a blessing!
If you are able follow through with that debt roll up payment approach, you would not need to settle.
If I understand your situation correctly, you are more looking to get your monthly payments reduced? If that is the case call my hot line at 800-939-8357, then press 1. You can consult with a counselor for free and get a to the penny quote of what you monthly payment will be.
If you are looking to settle with your creditors, start reading this article series: https://consumerrecoverynetwork.com/how-call-bank-negotiate-credit-card-yourself/
Thank you very much, I have a house that my father has a lien on, my car is a 99 dodge Durango and I don’t have much in the home due to divorce.. I have a 16 yr old son that lives with me and a 5 yr old daughter that I have 50/50 custody of…. what would you suggest if I have to default on this line of credit? I paid the 7000$ in full but unforseen circumstances arose and I ran it back up.. Thanks, Joe
If you have not alternative but to stop paying the account it just is what it is. I would suggest saving up money each paycheck. Save as much as you can and keep squirreling that away until you can offer a lump sum settlement proactively, or to have available if the collections does go to the court.
I do not like bankruptcy as an option for just the one account, and when considering the possibility you could settle it for half. That would be filing bankruptcy over $3500.
Hi, I’m Joe from North Carolina, I have a delinquent line of credit due to inability to pay.. I work but am divorced and I’m stressed out because of this 7,000$ debt that I can afford anymore. .. What are the repercussions of defaulting?
This line of credit is through a credit union. ..
I find Credit Unions to be less likely to sell unpaid accounts to debt buyers, and to have a higher incidence of using the courts to collect. This mostly applies to small credit unions. The larger the bank, that higher likelihood begins to diminish (think USAA, Navy Federal, etc).
The general repercussions are credit reporting and score damage and dealing with collection calls and notices. Ultimately you risk being sued for collection and a judgment entered, which is what this page is mostly about… exemptions from judgment creditors.
North Carolina does not allow wage garnishment.
Your car is protected for up to $3500.00 of value in North Carolina, and with an additional 5k if you do not take a homestead exemption.
There is up to $35,000 of your homes value that is protected from creditors with up to 60k for certain elder situations.
NC offers up to $5,000 of household goods value as exempt from judgment collectors (and on up from there depending on how many dependents you have), and more than that if no homestead.
Hi! Please advise: if filed the bankruptcy prior being sued for credit card debt, will it prevent from putting liens on the property acquired in the future (1-2 years after filing the bankruptcy)?
Did you file chapter 7 bankruptcy? Was the debt in question part of your bankruptcy filing?
You should speak with your bankruptcy attorney to confirm, but generally speaking, once you discharge a debt in chapter 7 there should be no collection lawsuit later on, which is what could then turn into a property lien.
We live in the state of Florida our combined income is 5441.00 monthly . My contribution is 680.00 monthly we owe around 55,000 in a loan and charge cards 27,000 on a car loan and around 47,000 on a mtg . We do not own the land we pay 460.00 monthly in land rent . My question is do you think we should do bankruptcy or struggle to pay the bills or just not pay at all and see what happens . My name is not on the car or personal loan or on the large credit card bill . Would I be responsible for this if he doesn’t pay even if my income is only 680.00 a month ?
How many people live in the household (include adult children attending college)? Chapter 7 bankruptcy has an income means test hurdle that you will have to clear.
Are the credit cards current? If late, by how much?
You would have to be sued before your income is at risk. It is unlikely you would be named in a suit for collection on a debt you are not liable for in Florida. If your husband is sued, and a judgment later entered against him, it is possible your money in a joint bank account could be at risk.
I currently owe about $2000 to the State of Arizona for back taxes from 2003, I believe that is the year. I now live in Arkansas. Can Arizona file a levy against my checking account I have here? My income is Social Security disability and survivorship pension from my late husband.
It is possible for your checking account to be levied for a judgment. I am not certain if your bank account can be levied for state administrative process, such as back taxes. I would talk to a debt defense expert in Arizona about this situation and see what they say.
I have not covered Arkansas debt collection exemptions yet on this page, so here are those details:
Arkansas allows up to 25% of wages to be garnished.
Arkansas is terrible for protecting your car. Only 1200 dollars of protection with a bankruptcy filing, but without that the exemption is 200 dollars, or 500 if head of household. And this must also cover personal property (household goods and cash in your bank account).
Arkansas does offer full protection of your home, regardless of value, from debt collectors, but not unlimited acreage.
I live in Nevada. I am retired and 65 years old. I retired early, at 62 in 2011, with no savings of any kind, as my 25 year old son had an accident which led to an injury that caused a stroke. His left side is paralyzed. He needed me for appointments and therapies.. I had great credit, no debts and was able to buy a 2 bdrm. $70,000 condo. He pays me room/board from his small disability, when he can. It goes into my Wells Fargo bank account. I have no savings account. Furniture is years old and bought second hand. My pension and SS also go into my WF checking account.
I receive a small pension from the county of $1158, before taxes and medical. My pension pays for 75% of my medical. I also was receiving $234 a month SS widow’s benefit. However, the county ” strongly ” suggested that I accept Medicare plan A&B, . They now take that out of my SS, so I am now getting only $129 from SS. My net pension is $845, for a total income of $974 a month.
When I bought my home it was a short sale and had a lot of needed repairs. When my son moved in, I needed a bed for him, bedding and other furniture as I had been living alone in a small studio for the past 8 years. Soon my two credit card debts crept up as I can barely make minimum payments and have nothing left for food, car maintenance. My car needed many repairs as it is from 2001 and not worth that much, anymore but gets me to the store, doctors etc. and those repairs also went on the cards.
I have no other assets besides my home, which is worth about $100,ooo. and I owe $60,000. I also owe $181 a month to HOA for a total of $652 a mo. I have not missed a payment on it or utilities, my first priority. But, I often put medicine, food and gas on the cards because I’m out of money each month after paying the card’s minimums, They have grown to the point I owe about $29,000.
We go no where, barely eat, have no entertainment so since 2011 nothing has gone on the cards except necessities. I believe now, if I didn’t have the payments on the cards, USAA and Wells Fargo, I could meet my monthly expenses, including food. My son does get $90 in food stamps.
I also have had several strokes and been in the hospital in the past 6 months, twice. I have stage 3 kidney failure, so I have hospital debts which I make small payments on. I told them when they first took me to the hospital, I couldn’t make the co-pays, but they kept me anyway. The first time I walked out after a few hours, refusing to stay overnight because of the money. Fortunately, I’m not disabled but the money situation is causing the strokes, I’m sure.
My credit FICO score is still good, but not for long, it just shows I’ve been a good budgeter until now. With my drop in income and added medical expenses, I can no longer pay them.
Should I just stop paying them? File bankruptcy? I don’t know how I would afford bankruptcy. If I just stop paying them, will be credit be ruined forever? I feel like such a poor example of a mother.
If I were in your shoes I would stop paying the credit cards in preparation for filing chapter 7 bankruptcy. You should consult with a bankruptcy attorney or two in your area. They will likely tell you to stop making payments on unsecured accounts too.
You could essentially blow off the credit card bills without filing the bankruptcy, but you are not fully judgment proof, and the collection activity that would commence will likely aggravate your health concerns.
Debt and credit has nothing to do with being a mother, so stop carrying that baggage around immediately.
Let me know what your thoughts are after you consult with a bankruptcy attorney.
For other readers in Nevada, here are the exemptions from judgment creditors:
Wages in Nevada are protected up to 75% (the federal minimum standard), or 50 times the federal minimum wage.
Nevada has one of the strongest protections for the value of your automobile, covering up to $15,000.00 of value.
Your personal residence is protected from judgment creditors in Nevada to the tune of $550,000.00.
Household goods are protected from the debt collectors by up to $12,000.00.
$400.00 dollars of cash on deposit in your bank account is protected (with some other wildcards of up to 1k unused exemptions). And of course your SSI is protected.
Thank you for your quick reply. In what way am I not judgement proof? I don’t have $400 in cash, my SSI is protected, and I think my county pension is too. My home is worth less than $550, 000.00 and I have a homestead exemption on it, too. My car isn’t worth that much either. What am I missing………besides ruining my credit which Bankruptcy will do, also. I’m not working. Dunno if I can find a lawyer I trust and I’ve met a lot of them (used to be married to one). Let alone for free ( I think there is a long waiting list?) I agree about the aggravation of having my two cards going after me but if I can’t pay, I can’t pay.
Thank you about my not being a bad mother. I’ve tried to be a good example, including paying bills and debts, but I simply can’t anymore.
My comment about collection proof was not as much from an enforce-ability of the judgment angle, but directed at how collectors will see you. Having a home will often raise your collection score that debt collectors use (regardless of the exemptions, or whether the property meets them), and with your health concerns aggravated by stress, I do think it a good idea to alleviate that pressure.
It can be difficult to find a bankruptcy attorney for free. Even low income legal aid I think wants some money, and there are filing fees regardless of professional fees (a bit over 300). You may be able to find a paralegal that will do the forms for a very reasonable amount. You may also be able to find a reasonable attorney. The national average cost of filing chapter 7 is roughly $1800. That is all costs. The more inland you get the costs can be down in the $1500 range.
OMIGOSH. That is what I was afraid of. If I don’t pay my two cards, it would mean we can eat and cover emergencies, like the battery my car now needs. It doesn’t mean I’ll have money to save for a lawyer, that would take me years.
Sounds like I’m stuck. You are right, I’ve checked around, everyone wants some money and by ‘some’ I am talking it’ll take me years to save enough. Even at $100 a month, we are talking a year and a half or so. Oh dear. Talk about between a rock and a hard place.
Thank you for your expertise. I suspected I was in a bad place.
You cannot get around the court fees of a few hundred dollars. You can do the forms yourself, I just don’t recommend it. NOLO puts out a decent DIY bankruptcy book that is affordable.
Thank you. I’ve seen the NOLO book and also almost every thing I’ve read says NOT to do it without a lawyer, it is too easy to miss a step and lose the house. With my strokes, I can’t trust my brain to not miss something, anymore. Yes, court fees alone would be something I could do in 6 months rather than years, but I’m petrified to try it myself.
I guess no one can help me, too poor for bankruptcy, too brain addled to trust myself to do it myself. Thank you for trying to help.
Hi Michael-
My father is 72 yrs. old, living in Oregon, retired and receiving his pension and SS. He has recently become ill and can no longer work part-time to pay his rent and credit card bills. He has $13k in CC debt. I have asked him to come live with me in NJ. What would happen if he stopped paying his CC’s? Could they come after me or my home? What is his best option?
You’re help is greatly appreciated.
Credit card banks and debt collectors cannot hit you up for any of your dad’s unpaid bills. There is not much they would be able to do to collect from him. He may be able to ignore the payment and collection attempts entirely, or may want to look into chapter 7 bankruptcy to wipe the debts away and eliminate any stresses that can often come with unpaid bills in the hands of debt collectors.
I’m a 75 yr. old retired female living in Georgia and my only income is social security, Ga. teachers retirement and FL teachers retirement all directly deposited in to my checking acct. Four years ago I sold my triple wide manufactured home to neighbors (which they moved to their property)with an existing mortgage left in my name. They just took over the payments and have been late a numerous times, missed 2 payments in 2012 and 2 payments in 2013. I rent an apartment and have my own expenses and can’t afford to make the payments for the buyers. Their late and missed payments are hurting my credit. If I should decide to let the bank repose it due to my inability to pay and the present buyers are always late and have missed a total of 4 payments and the bank sells for less than owed, then sues me for the deficient funds to pay off the mortgage, can the bank garnish any of my income which I have very little left over after bills are paid? Do you have any other suggestions?
They cannot garnish at the source, but if they sue and get a judgment, your bank account is at risk from being levied. You will have options along the way to deal with the debt. Post an update with the shape of things and this goes along.
I do not see where I have covered Georgia judgment credit exemptions above, so here are those:
Wages in Georgia can be garnished up to 25%.
You have a $5,000.00 car value exemption, but that amount must cover household goods too.
Home equity in Georgia is protected up to $21,500.00.
Cash in your bank account is protected in Georgia by up to $5,000.00. It is referred to by some as a wild card exemption because it has to cover all personal property (car, household goods, etc).
When I was a kid (15,16) I remember my mother boasting about only $2k more and the house was paid. I am now 54yo moved out when I was 18 and never inquired as to my mother and fathers financials. Two years ago my father died and I started looking in to my mothers financials. I’m dumb-founded! My mothers mortgage is $269K! She does not remember all the particulars; I believe predatory lending, but she needed my fathers pension and ss to supplement hers to make ends meet. She is 78 retired and has 22 years left on a 30 y mort. at 6%.
I did the numbers for her and she will sink just like Titanic. I’ve told her to walk away and come live with me. She receives SS and a pension from her union (local 1099 hospital workers in NY). Since hers was more than my fathers, SS was cancelled so was his pension, no continuance for her. She’s insistant on staying saying “she doesn’t want to ruin her credit”! Admirable, but foolish. I’m estimating 14mths till I have to buy her groceries. We have already turned off the phone and cable service. I got her a prepaid phone and loan her cd’s to watch.
I’m not proud of telling her to walk away, but, if she leaves and combines her money with mine I don’t think it can be attached. The money that she can accumulate will give her funds to enjoy a little retirement that may be left her.
Can I hide my mothers money with mine to care for her without attachment from default of her mortgage?
You may not have to hide her money at all if it comes from an exempt source. She may be able to maintain her bank account.
I would suggest walking away and filing chapter 7 bankruptcy to discharge all debts if this were my mother. That way there are no collection stresses to be concerned with later on.
I have a client who is 64 and collecting retirement in the form SSI, she is married and he is 65 also on SSI and they reside in Indiana. They owe Citi Bank 5,000 and a lawyer is suing them on the banks behalf. They own their home outright and are worried of the collection law’s in their state. What can happen.
Andrew
If it is Citibank that still owns the debt and who is suing, they are likely better of settling for as low a lump sum pay off as can be negotiated. This would prevent a lien on the property.
Indiana protects only $17,600.00 in home value from judgment creditors.
Wages in Indiana can be garnished up to 25%.
Value of your car up to $9,350.00 in Indiana is one of the stronger protections among all states, but this must also cover the value exemption of household goods.
Indiana protects $350 of cash on deposit in your bank account from levy that could result from a debt collection judgment. Their Social Security is protected in the bank account, but it is problematic when there are other nonexempt sources of money on deposit in the same bank account.
Can they pull together a lump sum of money to settle?
Your advice is wonderful and greatly appreciated.
My 84 year old father has gotten himself into severe debt. Me and my sibling are helping by kicking in cash each month, but are in need of a more comprehensive solution. Our goal is for them to be able to live and stay in their home (my mother likley to outlive my father by a bit).
They live in Wi and in a nutshell, has an interest only mortgage of ~$325K plus a $10k line of credit on a home worth roughly that balance total.
He has also amassed ~$50k in CC debt on which he pays the monthly minimums totalling ~$900/month. Monthly interest accrual is $400-425, and obviously on the rise.
Only income is SS, at a total of $2300 between mother and father. Given that, and the lack of other assets (they lease a car), I don’t see much benefit to Chapter 7, as opposed to simply stopping payment on the CC’s (and potentially any medical bill said), and continuing to make the mortgage and property tax payments, insurance, etc. religiously to retain the house. Doing so would free up that $900 in cash and quite honestly get the CC’s out of his hands. Would more or less have the same impact as bankruptcy, as I don’t see any real additional protection that the bankruptcy law. would provide in this case.
My siblings will continue to contribute to paying utility bills, groceries, etc,, but as much as I hate making it the bank’s problem, I don’t see a scenario where all that debt can be paid off.
Am I off? What am I missing?
The chapter 7 bankruptcy would benefit greatly to the following:
All collection efforts cease. I cannot convey well enough in a comment reply the amount of pressure and stress this can relieve your folks of.
Creditors and debt collectors do sue for non payment, and regardless if the situation suggests that would be pointless. This is not only a form of additional stress and collection pressures, but can end up with liens on the home, and potentially bank account levies.
Given the amounts owed on the credit cards, and the cost of a straight chapter 7 bankruptcy (under 2k), I would look to the relief from chapter 7.
Thank you very much for that quick and helpful response. I think you are probably right. Also looking at the Keeping Home Affordable (HAMP) program if they will qualify – which I think I they may. Any timing considerations on when to file Chapter 7 and possible implications. Thanks again.
If there are timing concerns for filing now, or delaying for a few months, it is something to talk over with the Bankruptcy attorney. I encourage your folks, or anyone in your family involved in locating an attorney, to read my article about how to find the attorney you will hire.
Michael, thank you I read the link you provided, I really cant afford that trailer anymore, and DMV costs, and tags have gone up this year in Idaho, I just paid my HHR registration for 2015 and it went up 20 dollars ! I really don’t want the trailer anymore either,it just sits in the driveway depreciating ,with gas costs etc Im just not as interested in it as before I went on disability. My boyfriends work in this economy has been very erratic and unstable, still no actual work and no solid start date, despite looking on internet, employment agencies etc.
It sounds like it is time to voluntarily surrender. It is no different than a repossession really. You arrange to give the stuff back, or for pick up, and they auction the stuff at a discount. The amount left as owed after the auction proceeds are subtracted from the loan balance is a deficiency balance, and will become an unsecured collection account (but based on a written contract).
Your risks and collection exposure will be the same as dealing with collection agencies for credit cards and the like.
Michael, First of all I appreciate all your help , Thank you! Unfortunately now I am up against another problem , due to my boyfriend being laid off again for the past 7 weeks I cannot pay the RV payment of $204.00 per month. US bank has started calling me for the money, It is now over 30 days late and they said I have to pay that payment on this 12th of Aug when I get my disability check and then to “catch up” I have to pay another payment on the 25th of Aug. I have tried to privately sell it and I called my son last night and he cannot afford to take over payments. …..I have had stellar payment record until right now with them. The trailer it is an R Pod is also underwater I owe more than it is worth. I purchased it in 2011 for $ 25,000 and I still owe $13,500. One lady at the bank suggested I do a voluntary repo after she spoke with me, what are the pitfalls for me? She said something about charging for storage etc and sending it to auction. At this point I really have no other options, the insurance on it and the cars is due this month also and thats 347.00 , He is fervently searching for work, the most earliest time he could possibly start is 17th of Aug, I told the bank this ,but they want the money, Is voluntary a better choice than the other option?
How much do you want to keep the trailer? How certain are you of your boyfriend getting back to work? Are you ready to let the items go?
If you let the items go to auction you will end up with a deficiency balance that is collectable afterward. You can read more about the risks and options afterward here: https://consumerrecoverynetwork.com/question/debt-collection-auto-loan-deficiency-surrender-repo-wage-garnishment/
The focus of that reader question, my feedback, and the comments, tend to be about auto repossession, but the entire discussion would apply to RV’s, boats, trailers, etc.
Your collection risks would be the same as we have discussed prior – for this type of debt – after the items are auctioned.
Hi Michael,
First I want to thank you for giving us the opportunity to get advice from you.
My situation is as follows:
I live in NJ and am currently waiting to SSDI. It is need based because I never worked long enough to get any benefits. While waiting for my hearing I am living with my son who has put a roof over my head and food on the table. He has gotten into enormous debt trying to keep up with my needs. My medications, credit cards, drs. etc. I have no medical insurance because we couldn’t afford it any longer. So my question in a nutshell is this…I have no income at all. My car is 11 years old. I have almost nothing of value. (a few odd pieces of jewelry). I’ve been trying to pay the creditors or collections agencies as little as possible but that has become more than we can handle. I had to go to the food pantry for food this week. That was when the lights went on and I realized something had to be done. My son is not responsible for my credit cards. So, my question is what can they do to me if I stop paying? What can the possibly take from me? If my SSDI comes through I will at some point get the back money from SS which can be a few thousand dollars. But who knows when that will be. I keep hoping it will come through so I can pay these creditors. I don’t owe an enormous amount. I’d say about $5,000. Please tell me what can happen if I chose to stop paying. Thanks for your help.
Scroll up a bit in the comments to July 8th 2015 where I cover New Jersey exemptions from judgment creditors. NJ is not great with consumer protections when dealing with debt collection.
That said, it sounds like you are close, if not fully judgment proof.
If you stop paying there will be collection calls and notices in the mail. Nothing more happens than that unless you are sued. You will have options to negotiate settlements with the creditors and debt collectors all along the way. Post updates in this comment string when you have some extra cash to work with that you would like to use to settle a debt or two and lets go from there. For now, if it were me, I would let the payments to the cards go until I have an income to work with.
I am embarrassed beyond belief but you’re right I need to consult an attorney. We both had hoped to work many more years. And now we have had to resort to the humiliation of food stamps. It’s surreal. I will keep you posted if anything new arises. You don’t know what it means to have someone nonjudgmental to talk to. Thank you for your help and thank you for listening. The work you do is helping many people. I hope you are aware you have been a help when there was no other resources. God bless!
Cindy
Michael, Thank you for all the information and answer per above, you answered my last question already the first time, I just had to re-read it this AM and process the information again as follows: “If the only money you have coming in is your SSDI, it is protected from garnishment including by Wells Fargo. But even though that is the case, I understand why someone would want to move checking and savings away from a bank they have unpaid credit cards with, but it would not be necessary unless you do get non exempt funds from time to time.” I just reread your answer again this AM to re clarify it for my self and maybe anyone else who was a little confused by my second question. Thank you for all your help ! Kathleen
Michael, How long after I have quit paying my credit cards can they initiate a lawsuit ? I live in Idaho. Is there anyway to know who will sue ? I have credit cards with Wells Fargo, Discover and USA Bank. My SSI Disability check goes in my Wells Fargo account, my only bank account. I know that I heard you can’t mingle funds with SSDI, SSDI is my only form of income. Can I take some money from my primary checking and open a savings in another bank ? would that money be exempt? Of course it would not be US Bank! Thank you for taking time to help me , it is much appreciated.
Idaho has a 5 year SOL to legitimately sue for credit card debts.
There is some predictability to which creditors are more likely to sue, but that logic can change depending on how collectable someone looks. I would say you are most likely to be sued by Discover, and by a debt buyer US Bank may sell your account to. Wells Fargo has some pent up debt sales that could lead to your being sued by a debt buyer too, or your account may be older and already with a debt buyer.
If the only money you have coming in is your SSDI, it is protected from garnishment including by Wells Fargo. But even though that is the case, I understand why someone would want to move checking and savings away from a bank they have unpaid credit cards with, but it would not be necessary unless you do get non exempt funds from time to time.
I can see I have not covered Idaho exemptions in the above comments before so here are those:
75% of wages are protected from judgment creditors in Idaho.
Up to $7,000.00 of automobile value is protected.
Idaho protects $100,000.00 of home equity.
$7,500.00 of your household goods are protected from being seized to satisfy a judgment.
There is no exemption for cash in your bank account in Idaho. But as you know, sources of funds like SSI and SSDI are protected in your bank account when not mingled. Do not let several months worth of those funds build up in your account.
Michael, I do not receive exempt funds in my Wells Fargo account, Could they refuse service to me ?(I use their bill pay system) after my SSDI is direct deposited in my account at wells fargo.
I cannot think of a single instance where Wells Fargo has closed someones account over an issue like you are facing with unpaid credit cards with them.