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.
I have just been served with a summons by Barclays for 2500,00. I lost my job due to injury and am currently applying for SS disability. I receive social security and a pension from my late husband from the state of Ohio. These funds are deposited directly in to my bank. I live in California. Can the funds be frozen? If not do I have to go to court for this summons or can I just do nothing ?
Funds in your bank from an exempt source are protected. Your SSI is safe. I would encourage you to reach an attorney about whether the Ohio pension funds are. You can reach the folks at HELPS to confirm. I did the video in the above article with their founder.
There are other reasons to prevent a judgment. Are simply in no shape to negotiate a settlement with the attorney for Barclay Bank? What if you had 6 months to save up?
I have a friend who is 76 years old in texas. She has been paying care credit for five years for a partial plate. With 29% intrest and 37.00 late fees she has probably paid three times the cost. Her fixed income is barley enough to pay rent medicine and food. She has no assets except a 99 ford. She wants to stop paying because she can’t gain on the balance. What can she do?
She can stop paying if the amount is a hardship. I know I would. If she is judgment proof there is little they can do to force payment. There is little to worry about Care Credit suing for collection, but they do sell debt later on to debt buyers that will sue. My suggestions for later will change depending on who picks up the debt.
I just got a notice today I am being sued in small claims court for a $3200 credit card debt. I lost my job a few months ago because the place I worked closed. I am now retired and my husband and I only have our social security checks and no money except that. We barely make enough money to pay our house payment and electric bill each month and are on food stamps. There is no way I can pay this bill. We have a house that we have about $15,000 equity in and one car worth about $8,000. I live in Alabama. I cannot afford a lawyer so I do not know what to do. I have 14 days to answer their letter. What do you suggest.
Who is the plaintiff suing you?
Richard Moxley out of Montgomery for Midland Funding
The options are not great. You can defend the suit, set up payments (now or later), negotiate a settlement, or let this thing go to judgment and… just let it sit.
You are not fully collection proof with the home as an asset. But they cannot take SSI or other exempt money from you. Any property lien that may result from a judgment can be addressed later on too.
I typically find it easier to negotiate a settlement now though, as opposed to after a judgment is entered.
We have no money to make a settlement. All we have is our social security checks each month. If I had some money I would have offered a settlement already. I decided not to answer or defend because I do owe the debt on the credit card so they will get a judgement whether I answer or not. I know in Alabama a married couple is protected with $30,000 worth of equity. If they put a lien on the house I will deal with it down the road. That is all I know how to do. All the money in our checking account is exempt.
I get SSDI as my only source of income. 6 months ago I got so overwhelmed with debt that I wrote all my creditors and told them I could no longer pay these accounts. I read in a bankruptcy book that given my circumstances I could not be sued because all I had was my SSDI for income. Is that true?
No, you can still be sued. It does not matter that your completely protected from judgment creditors. And it does not matter that you noticed your creditors of your situation. They can and do still sue. They just won’t be able to collect.
Silly, I know, but it is what it is.
I am on ss disability and sis totaling 750.00 a moth. Ican barely pay my bills but have a good credit score up to now.. I consigned on a bank loan for my grandsons mother. Totaling 2,552.00 with monthly payment of 135.00 . She has not made one payment and the loan is now in default. I can’t make these payments of course she assured me she would always make them. What can the bank do to me?. I live in Kansas, i am very frightened.
If you are sued you are at risk of property lien or bank levy in Kansas. Your SSI income is protected.
Making a question for my mother who does not have Internet. She went to court today to answer a summons for her 5,500 credit card debt. The attorney for the creditor told her that a judgement would be placed against her and said she could leave so she did. She has no income and lives off of her husbands social security income as he is disabled. They have a bank account and a very used- little worth car, they have a condo that still has 14,000 to be paid on mortgage. She is worried they will take her husbands money out of his bank account or take their car or house. They live in Colorado and I have been trying to research what the creditor can take. Any help would be great so I can put her mind at ease. Thank you.
Having a judgment against you in Colorado means you have to be concerned about:
Close to 25% of wages can be garnished.
Up to $5,000 value of your car is protected.
Up to 60k of your home equity is protected unless you are elderly or on disability, than up to 90k is protected (sounds like it applies to her situation).
Up to 3k value of household good are protected.
And there is no exemption for cash in your bank account. But federal laws would protect SSI and disability payments.
So if her car is valued at 1000 can they take her car? The only income they have is SSI. But can they freeze her account to verify that?
They would not be able to take the car. And if the only money in her bank account is from social security, these days, the bank should prevent that from being taken without her having to make the effort.
I am out of work due to a previous injury leaving me unable to work. I am in the process of filing for disability also. I helped my daughter open a bank acct at age 19. They told I should be on tbe acct in case she goes away to school but that we would have separate acct numbers. way to school. The put a levy against me pulling her money. Ive done research and it says she just has to prove money coming into her acct is her not mine to stop the levp. Is this true? Clearly the direct deposits are in her name only.
Also, she makes my car payment while I have no income. Can my vehicle be seized?
Thanks!
Have her contact the bank and get that ball rolling immediately so she can get her money back.
Who has the judgment against you? What is the name of the collection law firm handling this? The state you are in will often dictate the amount of exemption you have for vehicle value. Where do you live?
Hi Michael, my most recent update is as follows, I went to court on 11/7 to dispute the fees and costs and told the judge I felt it was a frivilous lawsuit, I did the best I could without a lawyer he also told the neighbors lawyer that it was frivilous, still on 11/18 they gave me me a judgement of $3,138.38 and $206.00 in costs and fees, which is down from original cost. I contacted a lawyer thru legal aid and she went over my finances with me and said I was judgement proof, She still said I could get a lean on my property when housing prices rise. Judgement is good for 5 yrs. Right now she said I dont have enough equity for a lean using the $100,000 dollar idaho exemption. She said I had 3 options. 1. is I can appeal,but its tricky , she would have to email me the small claims context -edit it and change headings with 42 days to do it in. 2. . Is contact neighbors attorney and say Im considering an appeal could I settle for $1,500..00 out of court ,I could possibly get that amount from my boyfriend . 3. is to pay $50.00 per month over 3 yrs time, 4 is do nothing but I dont want lien on property at all! I am strongly considering opt 3. Dont know if I can win appeal on my own per se. Feel terrible that I got slapped with this , If I appeal will I even have a chance? if I lose do I pay neighbors fees?? I can lose my house with a lien. What do you think ?
I have no way to comment on the viability of an appeal. If you want to try to negotiate a settlement I would be prepared to offer more than $1500 because it may come to that. I am not a fan of monthly payments in these scenarios if it can be avoided, but I know there are times it will make sense.
Thank you , I spoke w/ my neighbor last night apparently the rocks are not moved back enough for what it says in the court order, we did have a civil conversation, He said there are 2 more things he could do to me….I told him I was judgement proof he said the rocks need to move more, I cant do it they are huge and frozen, my boyfriend cant do it now either, I told him I would pay what I could , Right now I feel I could be in contempt of court. He did really appreciate that I finally spoke to him and seemed nicer though . Can they take SSI if contempt of court over this?
Your SSI is protected in most situations. Some exceptions can be tax and federal loan related.
i got into a contract to sell my va disability to borrow 2500 the pay back is 350.00 for 48 months the total payback is 16,800 i need to defualt on theis contract i havn’t received the 2500 yet i plan to cuange my bank account to stop them from taking any money out can the buyer of this contract sue me and take my va pension being i backed out of this contract
Connect with a low income legal aid office in your area or reach out to the nonprofit firm in the above video and get legal advice about your situation.
I’m a single mom with 3 kids who lost a job and was unemployed for 2 years living in a homeless shelter or my car. I got sued by Capital One and filed an answer. No $ for a lawyer. Now they want to negotiate payment but I have little money left after paying rent, utiilties, food, and car payment/car insurance. I got a job a few months ago but I’m barely getting by. Ex refuses to pay child support. I don’t want to file bankruptcy at all. I owe on other old credit cards/medical bills and haven’t been able to save enough to start making payments on those either. What do you suggest?
What is the total of all your unsecured debts?
Hello. I live in Indiana. I am disabled and receive Ssdi. I have an automobile loan that I cannot keep up with and is financially draining me. I have all my other necessary bills such as rent, lights, water etc. I am unable to have any money in reserve for emergencies. I am thinking about the only possibility I have for a way out is bankruptcy. If there is any information you can give me it would be greatly appreciated. I have 2 credit cards for which I am basically using for emergency issues but they too are now behind. I’m stuck and need help! Any information will help! Thank you
Review this article about consulting with a bankruptcy attorney first, then connect with one or more for a consultation about chapter 7.
How much are the credit cards?
What alternative do you have to get around if you give the car back?
I am 67 years old was forced to retire in May health reasons . My husband and I are on the title of ou 5th wheel that we live in . All debt is in my name only as my husband was unaware can I remove my name from title can they still come after trailer if so all or half of it ? It’s worth around 38,000
Are you still making payments on the 5th wheel? What are the debts you owe, and when did you stop paying on them? Have you been sued?
No it’s paid for what happened is I was more or less forced to retire in May we sold the house and paid off what we could the remaining debt is in my name only the fifth wheel is paid off but I am on title we live in 5th wheel in rv park
I was forced to retire in May we sold our house paid off everything we could I have unsecured debt in my name only 83,000 the fifth wheel is in my name and spouses i have depleted my Ira so I will start not making payments this month no never sued just good job and good credit
Fill in the talk to Michael form in the right column on this page. I will email you when I get that, and set up a time to talk with you on the phone.
I lost my job in September of 20015 due to medical problems. I’ve filed for disability and anxiously awaiting. My parents pay my bills and rent. I don’t quality for medicaid , and I get $19.00 a month I food stamps..I have a credit card company treating to sue me for 800.00 ..I live in Nebraska. I only rent andy car is maybe worth 600.00…I’m so scared. They harass me, called me a loser, and text my mother! I’ve been in medical field for 27 years and now I’m at my wits end.
Who is the collection agency texting your mother?
I live in Oregon. I own my home valued at 133k. I have 50k worth of unsecured credit. I am being forced to retire due to disability. I will have a pension and ssd. My payments for my unsecured debt is too high to make the current payments. Is it possible to file a chapter 7 and keep my house. Any other ideas please.
133k is too much equity to have in Oregon in order to protect the home in a chapter 7. You could do chapter 13 or settle with the credit card companies to avoid bankruptcy.
I highly recommend you do 2 things:
1. Consult with an experienced bankruptcy attorney in your area after you read this article about finding an attorney.
2. Read through my article series about settling debt for less than you owe.
I’m being sued in small claims court by a contractor. I have social security income only. Does it make sense to appear in court? Contractor does not have my current address.
Can you offer more details? Generally speaking, it is a good idea to participate in the process when being sued.
I was hired by state civil service in 1977 as assistant payment worker in Detroit Mich I am not retired social worker. My pension was taken partially 45 dollars out of bank account by fingerhut since August new federal law may 1 2011. Was broken.
Talk to an experienced debt collection defense attorney in your state about your options. You can also raise concerns with your bank.
I am 71. Yr old getting 985. Per month. S S. I was forced to stop working after back surgery and a rod placed in my back. I live with my daughter. Who lost her job several months after I did. She used to help me. I have a small savings account. I got a letter to appear at mediation for my credit card debt. Can they take my savings from my account.
How much savings are we talking about? Your Social Security is protected, but if you have a good amount of cash saved up, that could be at risk if they get a judgment against you.
Who is the plaintiff suing you, and for how much?
Need advice… The Wisconsin Department Of Revenue is trying to come after me for money for a past debt from a college I had gone to about 5 years ago. The debt amount is just under $500. I was told that a levy would be placed against my checking account, but when I called the Wisconsin Department Of Revenue, they had told me that they were unable to receive anything due to me only getting SSDI and that my income is protected… Is this true? I told them I could do a payment plan of $5 a month, in which I filled out a payment plan for that amount, but they told me the least they could do is $20, which I did not agree to. I received a notice stating I need to pay $20 by October 31st or they would take collection action, which includes a tax warrant, collection of my state tax refunds or other payments given to me. This all makes me very scared since I don’t have the funds to pay the debt and I don’t want to end up in trouble with the law or anything else!! Please help with any advice you can give me… Thanks!!
Do you normally get a tax refund?
I’m physically disabled and learning disabled and have not worked since 2001… I’ve not paid or received a tax refund ever since then… I tried to go to college, but it was tough on me with my learning disability and was unable to pass the two classes I tried to take… When I applied for college, I had accepted a grant that covered my classes and tuition, but the college had told me that due to me not passing those classes, that they would charge me the tuition, which is what the Wisconsin Department Of Revenue is trying to get money from me for… I honestly didn’t know that when I accepted the grant, along with not being able to pass the classes that I would have to pay back any of it, since it’s a grant!! If it were a loan, I could understand, but it wasn’t!! So, I don’t know what to think about this!!!
It is common to have to pay back grants if you do not complete classes or even the degree.
hi good article thank you but I can’t figure out what to do – I’m medically disabled and unemployed, have been doing a workers comp case for 3.5 years and my husband is the only one working barely making ends meet and we have a family … behind on some bills – trying to stay ontop of everything and there is only one creditor that is not working with us. Tried credit consolidating but still working on it and now getting a letter trying to collect by court judgement
Who is the original creditor at issue? What is the balance owed? How long has it been since you paid them?
Discover card, we were making payments to the for balance on card and were unable to keep up due to financial hardship. We were in contact with them every year to see what we can do to work with them and a lot of times they would work with us in smaller payments if i was able to do that. mid 2015 – thats when a law group started contacting us
Have you already been sued in court, and if so, when? Is there a judgment against you already?
yes – they are trying to get a wit written I think thats what it is called …
i called and spoke to the law group directly to see if they will work with us and spoke to them today – he says that they would want to get the balance paid in 3 years and they were going to see if they would take 150 a month – we asked for 100 and she said it would push it out to 5 years … we are trying to get lower so we can afford to pay as comfortable as possible finance wise … what are our options? what can we do?
If you have assets or income to protect, setting up some form of payment can be better than the alternative. But if you are on a limited and fixed income, with little to no assets, there will be little they can do to force collection. You can circle back and resolve the debt later when the situation changes.
Thank You for your advice …:) I do appreciate the time you took
just clarification on assests as in what – our income goes to basic needs, mortgage, bills
Thats about it
Your home is an asset.
Dear Sir,
I’m 72 and have a unsecured loan with One Main Financial in New York. I now live in Missouri. I draw Social Security and have a part-time job where I gross $75.00 a week. I have fallen behind on this debt $220.00 payment per month. I have been sending what I can and keep talking to them about lowering my payments but they just will not work with me. They have threatened me with garnishment. I keep telling them I am sending more than they would get from a garnishment but they keep demanding more….What advice would you give me. My wife is not on the loan can they demand payment from her? Thanks for your advice.
They can demand all they want, but if you cannot pay it, and are further protected by state law (you meet exemptions from extra ordinary collections), there is nothing they can do about it.
They cannot make your wife pay something she does not owe. And they would have to sue before they could impact your marital finances.