Can a Debt Collector Take Your Social Security?

Dear Debt Adviser,

My elderly mother has no income except her Social Security. She lost her home to foreclosure a few years ago after my dad died, and she has no assets. She owes $15,000 on her credit card. She had been paying them the minimum balance faithfully every month until they found out about the foreclosure. Then, they doubled her minimum payments. All calls to them for leniency fell on deaf ears. She stopped paying because she could no longer afford the monthly payments. Now, a collection agency has issued her a court summons. The only money in her bank account is what gets automatically deposited by Social Security. Can the collection agency garnish her Social Security income? How do we inform the bank that this is her only income? How can I stop this madness? Please help! We are desperate and cannot afford to pay an attorney. Thank you very much.

-- Susan

Dear Susan, I am glad you wrote on behalf of your mother. The elderly often find this sort of conflict to be overwhelming. She is lucky to have you helping her sort out this mess. To relieve both her fears and your own, let's start with your question about garnishing Social Security income. Social Security income is exempt from garnishment except in cases where the debt is owed to the government or child support. In the past, a person receiving only Social Security benefits would have to prove to the bank that the income was exempt (often after it had already been garnished). But thankfully, that is no longer the case.

The U.S Department of Treasury now requires banks to proactively protect federal benefits including Social Security from garnishment. Under the Treasury regulation, should a garnishment order be issued to the bank, the account must be reviewed before the order could be executed. Any federal benefits that are directly deposited into the account are protected from garnishment up to a value of two months' payments or the value of the account, whichever is less. So your mother's deposits for the last two months are protected, but any excess amount in the account can be garnished.

Now that you both know the rules about Social Security funds, let's discuss how she might pay what she owes -- if she wants to. Many people, especially of your mother's generation, do not like owing money to anyone. That includes pushy, seemingly unreasonable creditors. If that is the case for your mother, she could consider contacting a nonprofit credit counseling agency. She can speak to a certified credit counselor over the phone, and her counselor will help determine if she has enough income to repay her credit card debt through a debt management plan. A plan may get her payments back to a level that she can afford.

Finally, a court summons must be answered, and I prefer that she have an attorney represent her. Try contacting your local legal aid society for free representation or advice.

Good luck!

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