Golden Opportunities

Let me start with a story. A sad but true story about Mary. Mary lives on her Social Security benefits. In recent months, she’s had more and more trouble keeping up with her bills. But just the other day, things got a whole lot worse. She received a notice from the bank saying that her accounts had been frozen and she couldn’t get to her cash. Her checks started bouncing, which caused her a lot of trouble with her landlord and other creditors. What a mess!

In these tough economic times, it’s not unusual for us to have trouble keeping up with our bills. If we fall behind, can the credit card companies, retailers and others freeze out accounts and grab our money? You’d better understand your rights, or, like Mary, you could wind up with big problems.

When you don’t pay a creditor on time, let’s say you don’t pay your credit cards; the company can go through court and sue. If they get a judgment, then they can get a court order to freeze and seize funds right from your accounts. This is called garnishment.

They have to get a court order. They can’t just grab your accounts just because you haven’t paid. But with that court order, your creditors can reach into your accounts.

But wait: the law does give you some protection. Under the law, your Social Security payments are protected. Creditors cannot just grab your Social Security benefits. And they cannot freeze the account where your Social Security is deposited. These same protections generally apply to SSI and Veterans benefits.

There are a few narrow exceptions. For example, the Federal government can grab your Social Security to pay back taxes. And your benefits can be garnished to pay back child support or alimony.

But in general, creditors cannot freeze your accounts and grab your Social Security benefits.

Here’s the problem. It seems that a number of creditors either don’t know the law, or are ignoring it. And in way too many cases, banks have allowed theses illegal garnishments. The AARP has filed a lawsuit to stop these illegal bank garnishments and has asked federal regulators to protect our Social Security benefits. Banks that violate the law may be subject to huge fines.

So what can you do? If your bank allows an illegal garnishment, you could go to court to get the freeze lifted, but that takes time and money.

If you know you are having a problem with creditors, and especially if a creditor has obtained a court judgment, contact your bank immediately and tell them that the account contains your Social Security. And tell them it’s your sole source of income. Hopefully that will put them on notice to follow the law.

If you have other assets, like a house of mutual funds, the creditor may go after those, and there’s probably little or no protection there. At that point, it probably makes sense to contact a lawyer who works with creditor issues and bankruptcies. If you do have to file for bankruptcy, your Social Security benefits are still protected.

Hopefully, you aren’t having these kinds of problems. But if you are, it’s important to know your rights. And we’ll keep you informed, right here on "Golden Opportunities".