March 2, 2009
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News: Retirement Risk.
With all the credit risk going on today, it's inevitable that people are concerned over how credit card debt can hurt them. Certainly, those on fixed incomes like retirees, should be concerned. One of the primary concerns of these fixed-income folk have is about having their extremely-limited incomes garnished over credit card debt. Prime considerations are losing social security and pension checks or the sale of their homes being attached by credit card lenders.
The answer to those three questions is "no", "probably not" and "yes". Social security can only be garnished by the government for things like back taxes or child support. Not credit card debt. It's important to note here, however, that bank accounts (and many other assets, like personal property) can be garnished for credit card debt. So, if your social security and pensions are going into a bank account, it's important that your bank keep track of these amounts and categorize them as such. Banks hate to do this so, be prepared for a rough go with them. They probably won't even discuss it with you until after the garnishment is in effect. It's not an easy road. As far as the pension being exempt, the safest thing to do is check with the attorney general in your state to be sure.
For the sale of your house, know that a lien can be placed on the property. This would have the effect of either recapturing the credit card debt ‘off the top' of the sale, provided that it sells for more then the remaining mortgage amount owed. The house can't be sold without addressing this issue. Also note, though, that no one can make you sell your primary home.
Again, keep in mind that credit card debt garnishment is still very serious business. Personal belongings can be attached (except your primary automobile). Garnishment is not popular to anyone and, generally requires time and expense in court. Unless you hide your head in the sand, you will have plenty of warning (in the form of threats). If the threats have substance, ignore them only at your peril.