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Should Seniors be Scared of a Lawsuit for an Old Debt?

A senior, Mary, called me recently, terrified because a sheriffs deputy had come to her front door and served her with legal papers for an old credit card debt she owed. This had never happened to her before. Her husband had passed away several years ago. No matter how hard she had tried, she was not able to keep up on old credit card debt without his income. She was scared and didn’t know what to do.

I explained to her at the beginning that she would be fine. That this kind of thing happens actually quite often. I also explained that it was natural for her to be concerned and even scared. I promised that after I explained things she would feel much better.
My name is Eric Olsen. I am an attorney for nearly forty years and the Executive Director of HELPS.

HELPS is a national nonprofit law firm that educates seniors how they can maintain their financial independence and protects seniors and disabled persons from unwanted collector contact. Mary explained that her only income was social security and a small pension. I explained to Mary that her social security and pension was protected by federal law. That meant that it could not be taken from her. It was safe. If she would have had it, this would have also included disability and VA benefits and even $217 in take home pay per week from a little job.

Next, I explained what had happened. She owed an old debt which she was unable to pay. The credit card company filed what is called a lawsuit to establish that she owed this debt. When the time period expired in the notice she was given, the creditor would receive a judgment against her. Again I assured her she did not need to be scared. I also explained that they were not picking on her specially, that they probably filed many of these types of lawsuits all the time. That she was simply a number. She was not being singled out, even though it felt like that to her. She had a right to contest the lawsuit if she wanted, but since she owed the money, there was really nothing for her to contest.

That even though a sheriffs deputy served her these papers, this was a civil matter, not anything criminal at all. All sheriffs offices have a deputy called, a civil deputy, whose job it is, to serve civil papers.

She had questions about what would happen when they obtained a judgment. I reiterated that they could not take her social security or other retirement income. That I would explain why. Her social security and retirement income was automatically deposited into her checking account. I explained that federal banking regulations instructed banks to automatically disregard a garnishment of a bank account into which social security is deposited to twice the amount of monthly social security deposited into the account, no matter the source of funds in the account at the time of the garnishment. A garnishment is an order to seize money or wages served on a bank or employer after a creditor has a judgment.

Mary’s social security was $1200 per month. Then so as long as her checking account was less than $2400 at any one time a judgment creditor who filed a garnishment could take nothing. Her bank would disregard it. That made her feel better. For persons that are not buying a home that is pretty much the end of the story. Every state has laws that protect a persons personal property, like furniture and cars. These persons, like Mary, are sometimes termed judgment proof, meaning they have nothing anyone can take from them.

Mary was not buying a home but sometimes seniors are buying a home and worry about the impact of a judgment. In most states a judgment becomes a lien on a person’s real property- their home on land. But often that is meaningless also, either because there is little or no equity or there are other exemption laws that protect the property. Judgment creditors for unsecured debts virtually never takes steps against persons homes. They let the judgment sit there and hope there is enough equity so they get paid when the home is sold some day.

Judgment creditors will never tell a senior like Mary, that they they are judgment proof. Instead they often try to intimidate seniors by telephone contact or other strategies designed to scare seniors into paying the old debt. Seniors can choose to ignore the contacts. The law also provides that a person can send a debt collector what is called a “cease and desist” letter. That tells the collector they can no longer send letters or call anymore. A fill in the blank copy of a “cease and desist” letter can be found on the internet or HELPS website, helpsishere.org

Seniors, who are sued, can rest assured, that even though they might have a judgment, for a debt they can’t pay, their income is safe. There are sources for information about their rights if this happens. There are also means that they can be protected from unwanted collector contact.

Eric Olsen, Executive Director HELPS nonprofit law firm.

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Peace of Mind
These HELPS clients were dealing with harassing debt collectors and anxiety over old Debt. HELPS provided a solution to their financial worries.