Needing advice

[willylang]

I am 67 and my wife is 69. We owe $50,000 in credit card debt. We are currently making our payments but it is getting harder and harder due to medical costs. Our income is $2,600 a month on our Social Security checks plus my wife has two small pensions. An advocate from a local seniors organization advised us not to continue paying the credit cards and there would be no need to file bankruptcy since our Social Security checks are safe. Any advice is appreciated. Thank You.

[keepmine]

She's right about SS. It's exempt from garnishment.
However, do you have equity in a home or car? If so, those could be at risk.

[magyar123]

While SS and other pension amounts might be exempt from garnishment, when they hit your bank account it's only run of the mill money, and if any creditor has a judgment against you they can levy that account. And it is a major PITA to get those funds returned to you.

[willylang]

We rent our apartment but are making monthly payments on the car which we plan to continue doing so.

[keepmine]

While SS and other pension amounts might be exempt from garnishment, when they hit your bank account it's only run of the mill money, and if any creditor has a judgment against you they can levy that account. And it is a major PITA to get those funds returned to you.

This isn't exactly correct. WHat you have to do if sued is, put the court and the collector on notice that these funds are from exempt sources and furnish proof. It's only a PITA if, you ignore any summons and then your account gets levied.
Be certain that only exempt funds are in that account. Don't comingle exempt funds with any funds that are not exempt. Then, it can get messy.
I think I'd tend to agree with the senior center advice. You're execution proof as long as you play the game correctly. Bk will still be there if you can't handle the collection efforts.

[WhatMoney]

I agree with keepmine's advice above. Also see this thread:

http://www.bkforum.com/showthread.php?p=153627#post153627

As far as case law, here are the decisions:

Question: When SSA benefits are paid into a bank account, do they retain their character as protected benefits?

Answer: Yes. The U.S. Supreme Court has held that Social Security funds deposited into a bank account 'retained the quality of 145moneys' within the purview of section 407[.]' Philpott v. Essex County Welfare Bd., 409 U.S. 413, 93 S.Ct. 590, 34 L.Ed.2d 608 (1973). Courts have also held that the funds remain exempt from legal process even if they are commingled in a bank account with other funds, so long as they are reasonably traceable to Social Security. NCNB Fin. Servs. V. Shumate, 829 F.Supp. 178 (W.D. Va. 1993), affd. 45 F.3d 427, cert. Denied 115 S.Ct. 2616.

And the Federal Law that makes your SSA funds exempt:

42 USC 407(a) states: 'In general the right of any person to any future payment under this subchapter shall not be transferable or assignable, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.'

If you are in California there are specific state laws that are supposed to prevent your SSA direct deposit funds from getting frozen in the first place.
See California CODE OF CIVIL PROCEDURE SECTION 704.080

Basically, IF you have an SSA direct deposit into your checking account, the first $2,700 for one depositor, or $4,050 for two depositors (eg a retired couple), should not be frozen by the bank, even if there are other commingled funds. The bank is supposed to file a MEMORANDUM OF GARNISHEE to the levy officer within 10 days which serves as the legal challenge and exemption to garnishment. A challenge by the depositor/debtor is not required. Only funds in excess of the above amounts are to be frozen by the bank and challenged by the debtor to the courts to prove they are exempt funds. Again this is only California law. Connecticut has a similiar law.

Unfortunately, in speaking with several CA banks, they usually claim ignorance of the above law (enacted in 2005) and illegally freeze the exempt SSA direct deposit funds in violation of both State and Federal law. The banks clearly feel they are above the law, and if you don't like it you can always sue them. They rely on the ignorance of the general public, and especially SSA recipients, to avoid following the law unless forced to through litigation.

[magyar123]

Thank you Whatmoney for posting the above relating to California. I took the liberty to print out the portion and show it to my bank's branch manager. He was not familiar with this provision. Seems like regional managers do NOT notify branch managers of any new laws related to banking.
Small, one branch (at least here in Sacramento, CA) bank.

[WhatMoney]

magyar123,

This is from the relevant CA CCP Section 704.080:

http://www.leginfo.ca.gov/cgi-bin/di...04.010-704.210

And the new CA exemption amounts as of April 1, 2007. (The amounts in the CCP code above are old, pre-2007):

http://www.courtinfo.ca.gov/forms/do...exemptions.pdf

It would be interesting to see if ANY California bank actually follows the above code.

Here is some more procedure, from the Napa county Sheriff's office:

The creditor may instruct the Sheriff to levy on a judgment debtor's deposit account at a financial institution (bank, savings and loan, credit union) pursuant to a writ of execution (money judgment). A deposit account standing only in the name of the debtor or a joint account shared by the debtor and another person is subject to levy. The garnishment must be served at the specific branch where the account is maintained and only attaches those funds in the account at the time of service. The bank is required to mail the funds to the Sheriff within 15 days after service of the garnishment.

If funds are not remitted, the bank must mail a memorandum of garnishee to the Sheriff explaining why the funds were not remitted. The Sheriff will mail a copy of the memorandum to the creditor.

or public benefits account operates as a claim of exemption. The Sheriff will mail the memorandum together with instructions on how to oppose the exemption to the creditor. If the creditor does not timely oppose the exemption, the Sheriff must release the levy.

The garnishee is the Bank - they should issue the memorandum (Form AT-167, or EJ-152), which is the claim of exemption, when required per CCP 704.080.