Quick Answer: Senior debt advice often contains myths that harm vulnerable populations, as demonstrated by an expert incorrectly advising an elderly couple with $10,000 credit card debt to keep paying despite having only $1,157 monthly SSI income and no assets. Since Social Security benefits cannot be garnished and the couple is judgment-proof, continuing payments wastes their limited resources needed for basic survival.
by Eric Olsen, attorney and Executive Director HELPS Nonprofit Law Firm
I recently read a question on a website that helped persons with credit card debt. The answer given is typical of the deceptive, incomplete, and false answers many websites and their experts provide to seniors with financial problems. Here is the question posed from a dutiful son:
“I have a question regarding my parents’ debts. Both together have $10,000 debt on credit cards and they are receiving supplemental security income (SSI). This is the only income they have. They don’t have any assets and homes. Unfortunately, my mom had a stroke … and had two complicated major surgeries and she is still in the hospital since June. The Social Security office stopped my mom’s SSI and my dad cannot afford all the payment. My question is if he stops payment can the creditor garnish his Social Security benefits?“
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The expert begins by correctly clarifying the income for persons receiving SSI as “$771 per month for individuals and $1,157 for couples.”
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The expert begins his answer:
“I would certainly not suggest that your dad simply stop paying on this debt as a first solution. That may only make a bad situation much, much worse”.
My comment:
If the debt isn’t paid how could their situation become “much, much, worse?” The son clarified his parents have no home or assets. The expert then says that their income is protected and they are known as “judgment proof.” This is an elderly couple with only $1157 income. Do they really have any money to pay towards $10,000 in past due to credit cards? What other solution is the expert suggesting? Having just stated that their income is protected and safe the expert talks about their bank account.
The expert states:
“But there are subtleties to be aware of. While all Social Security benefits are protected from garnishment for credit card debt, the same may not be true for the bank account in which they are deposited. Here’s why: if your parents’ SSI payments are not direct deposited into their bank account, or if the SSI funds reside in the same account with other savings, they may not be fully protected.
Writing for the legal site Nolo, attorney Patricia Dzikowski says, “A creditor can still have your account frozen by serving the bank with a garnishment or attachment and, if you don’t respond to claim your exemptions, the funds can still be paid over to the creditor.” If your parents have direct deposit, then the bank must make sure they have access to two months of Social Security benefits. The remainder may then be taken.”
My comment:
The expert could have succinctly explained how and why mom and dad’s income is safe in their bank account with one sentence. Instead, the expert uses sophistry and gives a disingenuous answer, designed to scare and lead seniors to believe their bank account is at risk. His last sentence is simply incorrect. Federal banking regulations automatically protect two months of federal benefits deposited into a bank account no matter the source of funds in the account at the time of garnishment.
The expert titles the next part of his answer as:
“Safe from garnishment? You still must tackle card debt” Then goes on, “Since their situation is dire,…”
He puts a question mark after “safe from garnishment” as though their income may not be safe. If their income is safe why must they “tackle” card debt? Why is their situation “dire?’ They have no assets and their only income is federally protected. This expert has no intention of offering honest, complete, legitimate advice. His next comment reveals his motive.
Expert’s comment:
“A better solution might be to contact a nonprofit credit counseling organization. They will also go over all of the options available for taking care of this debt.”
My comment:
He actually encourages “dad” to contact nonprofit counseling agencies, sometimes called debt management companies and provides links. He doesn’t reveal that nonprofit counseling companies have prearranged agreements with credit card companies to take a certain percentage, normally 15-20%, of what they are paid as a “donation” from the Credit Card Company on whose behalf they collect money. This is a classic conflict of interest that is never disclosed to seniors who enroll in their programs. It is not the practice for these companies to tell a senior, “By the way you don’t need to pay us anything because all your income, Social Security, and your pension is protected by federal law and can’t be taken from you.” Instead, they regularly enroll lower-income and poor seniors with federally protected income into debt management programs, paying the debt they don’t have to pay, putting many into utter poverty.
Many seniors who owe debt go to the internet, seeking answers. Often they find experts and websites, who are like wolves in sheep’s clothing. Experts who skew their advice to the financial gain for whom they work. Some nonprofit debt management companies own or control separate websites that purport to offer advice to persons in debt. When in fact a careful examination shows these other websites are designed to deceptively direct persons to the debt management company that owns them.
HELPS is a national charitable nonprofit law firm. Our most important message to seniors is that federal law protects their Social Security, Pensions, Disability, and VA benefits. It doesn’t need to be used to pay old debt they can’t afford to pay. There are means whereby seniors can be protected from debt collector harassment. We educate seniors on how they can maintain their financial independence. Learn more about HELPS by visiting our website at www.helpsishere.org or calling HELPS toll-free at 855 HELPS-US. We turn no senior away that needs the help that we offer.
Before You Sign Anything: Run any debt relief contract through the free Contract Decoder to spot hidden fees and unfair terms. Check the company’s complaint history with the Scam-O-Meter.
Compare Your Real Options: Most debt relief companies won’t tell you about all your options — especially the ones they can’t profit from. Credit counseling has a 21-27% completion rate. Settlement resolves about 1% of enrolled debts fully. Bankruptcy has a 95% discharge rate — and protects your retirement. Take the Find Your Path quiz for a recommendation based on your actual numbers.
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