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

Learn More About How A Lawsuit Affects Senior Citizens

Seniors retire owing more debt than ever before.  The Economic Policy Institute recently reported that nearly half of seniors are “economically vulnerable,” and the percentage increases as seniors age.  Many seniors find themselves in a position where they simply are unable to pay their old debt.  Eventually a sheriff or process server may come to the door and serve them with a summons for unpaid debt.  This can be a scary experience for seniors, who naturally worry about their income and assets.  Many don’t know where to turn for answers about what to do.

Understand the Suit
If the senior does not owe the debt and wishes to contest it, the lawsuit provides a certain amount of time for a “response” or “answer” to be filed.  However, if the senior does owe the debt and has no basis to contest it, then he or she doesn’t need to do anything. The creditor will proceed to court and obtain a “judgment,” which is a court order signed by a judge stating that a certain amount of money is owed to the creditor.  Seniors often worry because the lawsuit might give a date and time to appear in court, but a careful reading shows that is only necessary if the lawsuit is contested.  If it isn’t contested, there is no need to go to court. 

Know Your Protected Income
Seniors’ retirement income – such as Social Security benefits, disability, VA benefits, and pensions – is protected.  That income can’t be taken or garnished, even if a creditor were to get a judgment. Seniors are sometimes called “judgment proof” because they have no income the judgment holder can collect. 

Understand Protected Bank Accounts
Often seniors worry about what happens to money in their bank account after a judgment. Fortunately, federal banking regulations automatically protect from garnishment twice the amount of federal retirement income, including Social Security benefits, that is electronically deposited into a checking account, no matter the source of funds in the account at the time of a garnishment.  For example, if a senior received $1500 in monthly Social Security benefits, then $3000 is protected automatically in the event of a garnishment, no matter where the money came from that is in the account.

If there is excess money in the bank account – more than twice the amount of the Social Security deposit – or if a senior has another bank account, a garnishment could temporarily freeze the senior’s account. In that instance, a senior would need to file a “claim of exemption” with the court.  This is a form showing a judge that the money in the garnished bank account came from monies that were exempt.  Of course, this can all be prevented by having only one bank account – the bank account into which Social Security benefits are deposited – and making sure there is never more than twice the amount of monthly Social Security in that account.

Understand Protected Private Property
Every state has exemptions that protect a certain amount of value in personal property, like furniture or vehicles. Even if a senior has personal property valued at more than the state exemption, it is simply not the practice of consumer judgment holders to go after personal property; the process is too expensive and complicated.

The same is true for a senior’s home.  A judgment usually becomes a lien on the home, but in most cases that’s essentially meaningless.  To begin with, state exemption laws protect certain amounts of equity in a home.  And even if a senior has equity in a home above the state’s exemption amount, consumer judgment holders virtually never take steps to force a sale of the house. They are happy to let a lien sit there and hope to get paid in the future, perhaps when the home is sold.

For almost all lower income and poor seniors, a lawsuit is not cause for concern.  Their income and assets are safe and protected.  However, it is not unusual for judgment holder to take other steps to intimidate or scare seniors into paying a debt they don’t have to pay. Unfortunately, there is much misinformation on the internet including from some attorneys and other so-called experts. Please visit HELPS website, or our YouTube page, There you will find scores of articles and videos by HELPS that provide more information about lawsuits and other topics of importance to seniors.

If you are as senior or disabled person with old debt you can’t afford to pay, remember your income is protected. There are answers to your questions.  HELPS represents seniors and disabled person in all 50 states in order to stop unwanted collector contact. Please visit us on the web or call toll free 855 HELPS-US to learn more.  We turn away no qualified senior or disabled person.

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.