Freedom From Debt Collectors
What Every Senior in Missouri Should Know to Protect Their Social Security Benefits.
You’re about to discover the secret to avoiding the stress of worrying about creditors garnishing your bank accounts. Find out the answers to the biggest questions Seniors facing financial issues are asking.
Avoid the BIGGEST mistake Seniors make trying to dig out of a financial hole?
· What if I am on Social Security and don’t have any money to pay?
· What if I have a small, part time job? Can creditors garnish my wages?
· What about my retirement benefits — can creditors garnish my retirement?
· What if I own my home and have equity in my house?
· What if my creditor tries to sue me?
What is the BIGGEST mistake Seniors make when dealing with their creditors?
Bar none, the BIGGEST mistake Seniors make not knowing that they MAY be Judgment Proof and that Collectors CANNOT garnish their checking account if they have Social Security Benefits automatically deposited into their account.
There is a general underlying principal for those who have Social Security, but you must read the whole thing and maybe even talk to an attorney to be sure.
1. If you have your Social Security money auto-deposited into a bank account, the creditor might not be able to garnish that bank account. Notice I did not say, all your bank accounts — only the one with the auto deposit of the Social Security direct deposit. The reason is that creditors are not entitled to get any of the Social Security money. Even if you have a small job for a little extra money or receive a small pension, it is hard to see what portion of the funds are from Social Security and what are from other sources and therefore it is hard for the creditor to garnish your bank account.
2. If you are a renter and only have Social Security income, you can be pretty much Judgment proof. Talk to an attorney, but it is likely you don’t need to file bankruptcy, worry about getting sued, or stress about your finances at all.
3. What if you own your home? See the section below on owning your home.
Most Seniors don’t have a good deal of equity in their home and only are living on Social Security. Those Seniors probably don’t need to do anything other than live their life. However, just because you don’t need to file bankruptcy does not mean you may not wish to do so. Many people who don’t need to file because they are judgment proof CHOOSE to do so just because they can’t take the stress of the phone calls and getting sued by their creditors.
Note, just because you only have Social Security does not mean the creditors will stop calling you. However, it never hurts to tell them this is your only source of income and they may not proceed to filing a lawsuit if you are a renter.
Stress does impact your health. This publication is to help you know if you are judgment proof and thus strip off the overwhelming sense of fear and worry when creditors are calling you. For some people, the knowledge of knowing creditors can’t take their Social Security Benefits is enough to fight off any impact of calls from creditors. For others, the continuous calls still takes it’s toll on their health and they file bankruptcy just to make the calls stop.
What if I have a small, part-time job?
In Missouri, if a creditor has a Judgment against you, they can garnish 25% of your wages. You can only have one garnishment against you at one time.
Many seniors have a small, part-time job just to keep active or to help supplement their Social Security income. Unfortunately, these wages can be garnished by your creditors. In the end, you will still be able to earn some money to help with your budget even if the creditor does take some of your funds. However, remember, they do need to get a Judgment against you first and also take the steps to try to garnish your wages. Some creditors do go ahead and obtain a Judgment against you but don’t take the extra step to garnish your wages. They may wait to see if there is anything available from your Probate Estate (after you die).
What about my Retirement Benefits? Can creditors get them?
Retirement benefits are 100% protected UNTIL you convert them to cash. Remember that you want to put any funds taken out of your Retirement Account into your Checking Account and not a savings account. (The only bank accounts which MIGHT be protected are those co-mingled with your Social Security Benefits). Further, if you have a large amount in your checking account that you are not spending, the creditor may be able to get these funds.
Another issue can be that some Annuity Accounts are NOT protected. You will need to talk to an attorney if you have an Annuity as opposed to a traditional 401K or IRA account. This is often helpful to have funds coming in each month to help with your budget, but it could impact your ability to protect those funds from your creditors or in bankruptcy. You will want to make sure it falls under the same rules and guidelines as your retirement account and cannot be garnished. To be sure, you might need to talk to a bankruptcy attorney or your financial adviser.
What if I own my own home and have equity in my house?
In Missouri, you are only allowed $15,000 worth of EQUITY (value of your home minus what you owe) in your home before creditors can put a lien on your house.
Many seniors have done the right thing over the years… they purchased a house and faithfully made their house payments to try to have their home paid off as a benefit in their retirement years. The only problem is that if you do have equity in your home, your creditors can sue you and put a lien on your house.
Putting a lien on your house does NOT mean they will take your house away from you.
If a creditor has a lien on your home, what this means is that you cannot sell the property without paying the debt. Judgments can last for 10 years and then they need to be “revived” (extended). Most creditors wait until you have passed away and then make a claim against your probate estate to collect on the amount owed (including 10% per annum interest). Even if you do a Beneficiary Deed or Quit Claim Deed, the Lien would remain just as your mortgage lien would remain if you tried to change the title on the property.
The good news is that you don’t really have to worry about this unless you want to sell your house. The bad news is that it will diminish the amount of funds your heirs would receive after you pass. If you have less than $15,000 of equity you may want to file bankruptcy to avoid these liens and provide a greater benefit to your heirs when you pass away. If your equity is greater than $15,000, you will want to talk to an attorney to see if bankruptcy is even an option for you.
WARNING: Taking out a home equity line of credit may be a BAD idea if you won’t be able to make this payment with ONLY Social Security Income. If you lose your part time job or your pension benefit dries up, or you use up all your retirement, then you could be putting your home at risk.
What if a creditor files a lawsuit against me?
One thing people worry about is garnishments! In Missouri, the creditor can take 25% of your wages unless you are HEAD OF HOUSEHOLD and then they can take 10%. But before they can garnish your wages or your bank account, they must get a JUDGMENT against you. This means that the Sheriff or a Special Process Server will deliver a copy of the Petition filed against you. There will be a court date.
The mistake people make is they just don’t fight the lawsuit; only one spouse shows up; or they fail to answer discovery and the Creditor gets a Summary Judgment.
YOU CAN REQUEST A CONTINUANCE to hire an attorney or at least buy you time to speak to a bankruptcy attorney. The trick is that if the Judge asks you if you owe the money, the answer is “No, I am hiring an attorney.” If you say “Yes, but…” you won’t get the rest of the sentence out and the Judgment will be granted against you. All you have to do is request a continuance is (1) Show up ON TIME for your court date (15 minutes early is better); (2) check in with the Bailiff with your paperwork; (3) wait for the Judge to call your case and then head up front to the Judge; (4) let the Judge ask you if you want a continuance or if you owe the debt; and (5) ask for a 60 day continuance (you might not get that long but you should get at least 30 days) and say you want to hire an attorney; (6) talk to the creditor attorney in the hall after if you want to work out a payment plan, but don’t assume it is going to go through.
If you want additional information on how to negotiate with your creditors, you can check out additional resources we have available.
IF BOTH YOU AND YOUR SPOUSE ARE ON THE DEBT, YOU BOTH HAVE TO SHOW UP AT COURT. If both Parties don’t show up, the Judge will grant a Judgment against one Party and then ask you what you want to do.
THERE IS NO GOOD EXCUSE WHY YOU ARE NOT AT COURT. You can try to call the Clerk to see if you can continue a case for what you think is a good reason, but there is no guarantee you will be granted a continuance. It must be reset for a new date BEFORE the actual hearing date. Plus, you can’t be late. They will NOT recall your case. If you have a problem and can call the Clerk maybe 30 minutes before Court, you MIGHT be able to let them know you have car issues or traffic problems and they MIGHT agree to hold the file until you get there… BUT DON’T COUNT ON IT.
I hope this information is helpful to answer some of the questions you might have about dealing with your creditors and protecting your Social Security Benefits. Want the rest of our Whitepaper? Get answers to additional questions…
· What if I am a renter?
· What if I am behind on my house or car payment?
· What if I owe money to a hospital — can they deny me future services?
· What if I am behind on my utilities?
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Carrie Sue Doxsee, Senior Attorney at Law In Kansas City
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