Some types of bank accounts or sources of income may be exempt from a creditor's debt collection efforts. When it comes to a debt judgment for a credit card balance or medical debt, generally your Social Security benefits are protected, but the debt collector may still be able to take funds directly from your bank account, depending on your particular situation.
If you are unemployed or receiving disability pay at the time a debt judgment is rendered against you, or if you have no assets of significant value (house, car, land), you may be "judgment proof." Even if you believe you fit the criteria for being judgment proof, it is prudent for you to respond to a creditor's lawsuit. Failure to appear or otherwise contact the court to explain why you believe you are judgment proof, puts you at risk of having a default judgment granted to the debt collector. Being judgment proof may only halt collection efforts temporarily. If you obtain employment or your financial situation otherwise improves, the creditor can seek a court-ordered wage garnishment or bank levy. Depending on the type of debt, the creditor may be able to garnish your Social Security benefits as well.
A few exceptions exist for the exemption of Social Security payments from debt collection. If you have your Social Security check deposited into an account that is commingled with other sources of funds, a creditor may be granted access to the account for garnishment purposes. If the bank account is solely used for Social Security income, then it will be protected, unless the debt judgment is for back child or spousal support payments, unpaid federal income taxes or a federal student loan. With these exceptions, garnishment of Social Security benefits may be allowed.
Cease Contact Letter
If the debt collector knows your only source of income is from Social Security, yet she continues to try and garnish your bank account, consider sending the collector a cease contact letter. On their website, the Neighborhood Economic Development Advocacy Project Inc. offers a sample cease contact letter that can be given to your bank, telling them not to freeze your account. The bank may or may not honor the request, but at least you have put them on notice that the funds in your account are exempt from debt judgments. A copy of the letter should be sent to all debt collectors as well, by certified mail. They must then cease contact with you, except to inform you of any subsequent actions they will be taking or to advise there will be no further contact.
Fair Debt Collection
Unfortunately, unscrupulous debt collectors do exist out there, who will engage in federally prohibited debt-collection conduct. Many times, their actions are merely a scare tactic to prompt a debtor to pay, but they may be in violation of the Fair Debt Collection Practices Act. You can contact the Federal Trade Commission at (877) FTC-HELP or see their website (ftc.gov) to find out if a debt collector's conduct violates federal laws. It is advisable to consult with an attorney to verify your rights.
- Photo Credit Comstock Images/Comstock/Getty Images
How to Prevent Social Security Benefit Garnishment
Federal statute exempts Social Security benefits from garnishment of any kind by private creditors, such as credit card companies and other lendors...
How to Protect My Bank Accounts From Judgments
In some states, a creditor who wins a civil lawsuit against you can request a writ of garnishment, which it then uses...
How Do I Get a Copy of My SSI Award Letter?
You can get a copy of your Supplemental Security Income award letter online or at a local Social Security office. If you're...
Can a Debt Collector Put a Lien on My Social Security?
Liens against Social Security benefits are typically referred to as garnishments or levies. Social Security payments are subject to liens in certain...
Can a Credit Card Company Sue Me While I Am on Disability?
Receiving disability payments does not protect you from a credit card company’s lawsuit -- but it may deter legal action from both...
Is a Retirement Account Judgment Proof?
Retirement accounts offer some measure of protection against judgments. But you must understand how these protections work. You may be limited in...
Is Social Security Exempt From Judgments?
The Social Security Act, found under Title 42 Section 407 of the United States Code, protects Social Security income -- intended as...
Unearned Income & Social Security
If you plan to retire and consider Social Security retirement income as a major factor in your retirement portfolio, you should examine...