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Debt collection facts for people on Social Security benefits

Many older adults in Fort Lauderdale, Florida, find themselves on a fixed income after retirement, living on what they receive from Social Security benefits. Unfortunately, this amount may not be adequate to cover unexpected expenses. Relying on credit cards to pay for these emergencies can backfire, though, since making the payments can create new financial challenges for those on an already inadequate budget.

The Consumer Financial Protection Bureau states that while those who are employed are typically subject to garnishment of wages or bank accounts, creditors are limited in their collection options when Social Security benefits are the sole source of income. Any money in the account that is not verified as coming from these sources can be frozen. A person who receives a paper check from the Social Security Administration may have to go to court to prove that the funds are protected before being able to access the account again.

When these funds are deposited into a bank account via direct deposit, up to two months’ worth of benefits are automatically protected from garnishment. If the amount in the account is greater than that, the bank can freeze the assets. The bank must send a notice that the funds are garnished, and may also charge a garnishment fee. These limitations do not apply to debts owed to the federal government, such as student loans or taxes. Child support or alimony may also be subject to garnishment.

According to the Federal Trade Commission, creditors are not allowed to harass debtors over past due bills, but they are allowed to contact them to ask for payment under certain circumstances. People struggling with debt may be able to file for Chapter 7 bankruptcy to find relief from the stress and live more comfortably on their fixed incomes.

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