Wise Words: Seniors and Consumer Issues

When people retire, they naturally assume that life is smooth sailing henceforth. After decades of hard work, they believe that they can enjoy the rest of their days in leisure. Unfortunately, that is not usually the case for many seniors. For many retirees, the reality of retirement means having to live on a fixed income—usually in the form of Social Security retirement benefits. In a world where the cost of living is always on the rise, that income is often insufficient. One car repair or medical bill can mean financial ruin for many seniors. Instead of a worry-free living, retirement may mean many sleepless nights wondering how to pay for basic needs or mounting credit card bills.

Bankruptcy may be an option, but is often not necessary if a senior only receives federal government benefits, and does not own any property of significant value. Federal government benefits typically include Social Security and Veterans’ benefits.

Before a creditor can garnish a person’s income or attach liens on their property, they must first sue the debtor and obtain a judgment against them. Once a creditor obtains that judgment, they can attach any non-exempt property or income from the debtor. Social Security and Veteran’s benefits are generally exempt and cannot be touched by creditors. In 2011, Congress went a step further to protect seniors by establishing rules for the garnishment of accounts containing federal benefit payments that are directly deposited into a financial institution such as banks and credit unions.

Under the federal rules, a bank has the duty to identify such accounts and protect them from levy or garnishment. When served with a garnishment order issued against a debtor, the bank must perform an account review. If the account review shows that a federal agency deposited a benefit payment into the account during the previous two months, then the financial institution must calculate and establish an amount of money in the account to be protected.

California law complements the federal law and goes even farther by declaring that a bank account that receives Social Security benefits by direct deposit is automatically exempt up to $2425 for one designated payee and $3650 where two or more designated payees share an account.

What this basically means is that if a judgment creditor attempts to freeze a bank account containing only federal government benefit such as Social Security benefits or Veteran’s benefits, the bank will not freeze the account and the judgment debtor need not do any further action. The Federal and Californian laws, however, do not apply when the levy is based on a family support order or if the levying entity is the federal government.

If you are an Orange County resident age 60 years or over and have questions about collection issues, you can call the Senior Citizen’s Legal Advocacy Program of the Legal Aid Society of Orange County at (714) 571-5245. There, you can discuss your issues and have them individually evaluated.