August 19, 2019

Should I File for Bankruptcy – Widow on Social Security with $7,500 in Credit Card Debt to Same Bank Where She has a Checking Account

I am 65 years, a widow of 5 years, totally disabled, & my SS check is $1342.00 every 4 to 5 weeks. My SS check is auto deposited in my same bank that I have a $7,500.00 credit card debt owed.  

If I were to file for bankruptcy, could my bank garnish my SS check?

Also, my rent is $800.00 per month, & utilities use up the rest of my check without paying my credit card or buying food. I have been living on the sale money of my house which is almost  depleted.  Will that too enter into a bankruptcy?

I could use the $150.00 that I pay each month to my bank in credit card bills to buy food.  Right now I have excellent credit but have to eat come next fall or sooner. I would appreciate your advice.  Thank you.

Jonathan Ginsberg responds:  E, thank you for your question.  I don’t know that you need to file a bankruptcy.  Under federal law, Social Security money is totally exempt from garnishment or seizure by a credit card lender.  In other words, if you stopped paying the credit card, the bank (which I understand is the same bank that issues the credit card) would not be allowed to set off the money in your account to satisfy the credit card debt.  They also cannot garnish your Social Security check directly.

It is possible that the bank would close your checking account, so I would suggest that you go ahead and open a checking account with another bank.

Your bank account would be protected as to any money that is traceable to Social Security.  If you still have money in that account from the sale of your house, that money is not sheltered.  As you might imagine, it can be difficult to identify which money comes from the house sale and which comes from Social Security.  For this reason, I would do the following:

  • go to another bank and open a checking account and designate that account for the direct deposit of your Social Security check
  • go to another bank and open a savings account where you would place whatever remains from your home sale

You want to clearly separate your Social Security money/account from any other money.

Next, I would write the credit card lender and advise them that you cannot afford to make the payments anymore, that you are judgment proof and that your only source of income is Social Security money.  I would further advise the credit card lender that if they attempt to garnish your Social Security account you will sue them for actual and punitive damages.

Bankruptcy also does not make sense to me because the cost of filing even a simple case will cost you $1,000 or more.  It doesn’t make sense to spend $1,000+ to get rid of $7,500, especially when you are judgment proof.

Now, if you don’t pay the credit card debt, you will have to deal with collection phone calls and some nasty letters.  But, at the end of the day, there is not much they can do other than to call you and you can avoid the calls with Caller ID. Once they realize that there will be no recovery the calls will stop.

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