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Information on Whether Pensions can be Garnished - The Bills.com Blog
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Information on Whether Pensions can be Garnished
Thursday, Mar 19, 2009
Question: I live in Rhode Island and bought my home just about 2 years ago. When I bought the house, the loan company arranged a 1st and 2nd mortgage to cover the total cost of purchasing the home? Now, I'm nearing 55 yoa and my health has deteriorated to the point that I am looking to move to a different climate for health reasons. In addition, my health history is such that I can't even get mortgage life insurance to cover the mortgages. So I'm looking at just walking away from the house and letting the bank take it. Because I don't expect to be around this time next year, I'm not concerned about the affect on my credit rating. Here is my concern: I retired from a government job that furnishes me with a private pension. I do not expect to get another full time job and I have no health care benefits. In order to live until whenever, I will need my pension benefits to cover my living and medical expenses. So; can my pension benefits be garnished by the mortgage company? and can I be forced to sell any personal assets (car, motorcycle, or other personal property to offset the loss to the mortgage company?
Answer: When home is foreclosed upon, the mortgage lender usually auctions the property at a foreclosure sale, applying whatever amount is received at the foreclosure sale to the debt owed on the mortgage. In many cases, the sale price at auction is not sufficient to cover the mortgage and other secured liens on the property, such as home equity loans; the difference between what you owe on the property and what the lenders actually receive is called a deficiency balance. In many states, including Rhode Island, mortgage lenders can pursue borrowers for deficiency balances
resulting from foreclosure on mortgage and home equity loans. If you would like to read more about the foreclosure process, I encourage you to visit the Bills.com Foreclosure page at http://www.bills.com/foreclosure/.
If you decide to allow your home to go into foreclosure, and assuming that the foreclosure sale does not cover the full amount of your mortgage or home equity loan, you will likely own a deficiency balance, which the lender could attempt to collect. Its collection efforts could range from simple collection calls and collection letters all the way to filing a lawsuit against you for the balance owed. If the creditor does try to sue you, and if the court grants it a judgment against you, the creditor may be able to place a lien on any real property you own. You may be able to work with the creditor to repay the debt to prevent the negative consequences of the creditor’s collection efforts. From my experience, most mortgage and lenders are willing to offer flexible repayment terms to borrowers who have defaulted on their loans. However, if you find that the deficiency balance claimed is too large to pay off within a reasonable time frame, or if the creditor is unwilling to work with you to establish workable payment terms, you may wish to consider filing for bankruptcy protection to resolve your deficiency balance. I strongly encourage you to consult
If you decide to allow your home to go into foreclosure, and assuming that the foreclosure sale does not cover the full amount of your mortgage or home equity loan, you will likely own a deficiency balance, which the lender could attempt to collect. Its collection efforts could range from simple collection calls and collection letters all the way to filing a lawsuit against you for the balance owed. If the creditor does try to sue you, and if the court grants it a judgment against you, the creditor may be able to place a lien on any real property you own. You may be able to work with the creditor to repay the debt to prevent the negative consequences of the creditor’s collection efforts. From my experience, most mortgage and lenders are willing to offer flexible repayment terms to borrowers who have defaulted on their loans. However, if you find that the deficiency balance claimed is too large to pay off within a reasonable time frame, or if the creditor is unwilling to work with you to establish workable payment terms, you may wish to consider filing for bankruptcy protection to resolve your deficiency balance. I strongly encourage you to consult
with a qualified attorney in your area if you are considering filing for bankruptcy protection. In addition, I invite you to visit the Bills.com Bankruptcy page at http://www.bills.com/bankruptcy/.
In your case, bankruptcy may be the definitive solution, but it may not be absolutely necessary. Most pensions, like other forms of retirement income, are exempt from garnishment or attachment to repay court judgments, so it is possible that you could simply allow this debt to sit unpaid indefinitely. In many cases involving retirees, the only major drawback to doing so would be the negative impact this unpaid debt would have on your credit rating. If the lender sues and obtains a judgment against you, it could attempt to force the sale of various items of personal property to pay the outstanding debt, though this procedure is very seldom used except in those cases in which the debtor had high value luxury items, such as paid off a paid off Mercedes-Benz. Again, I strongly encourage you to consult with an attorney licensed in Rhode Island to discuss the risks and benefits of allowing this debt to go unpaid, and what action the creditor can take against you to force payments.
I wish you the best of luck is solving your financial difficulties, and hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
In your case, bankruptcy may be the definitive solution, but it may not be absolutely necessary. Most pensions, like other forms of retirement income, are exempt from garnishment or attachment to repay court judgments, so it is possible that you could simply allow this debt to sit unpaid indefinitely. In many cases involving retirees, the only major drawback to doing so would be the negative impact this unpaid debt would have on your credit rating. If the lender sues and obtains a judgment against you, it could attempt to force the sale of various items of personal property to pay the outstanding debt, though this procedure is very seldom used except in those cases in which the debtor had high value luxury items, such as paid off a paid off Mercedes-Benz. Again, I strongly encourage you to consult with an attorney licensed in Rhode Island to discuss the risks and benefits of allowing this debt to go unpaid, and what action the creditor can take against you to force payments.
I wish you the best of luck is solving your financial difficulties, and hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
Also, make sure to get a free financial health check-up with Bills IQ!
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1. Posted by Juliette on Friday 3rd April 2009 18:30
I live in alabama. Can my creditors garnish my pension income. I retired from the city of birmingham
2. Posted by Bill on Monday 6th April 2009 14:00
For most debts, pension benefits can not be garnished before they are paid to you. Once you receive the pension income it can be garnished, for example if you deposit it in a bank account. If you are aware of a threatened lawsuit or a court judgment against you, consider paying your bills in cash or money order as discussed above rather than depositing your pension check in an account where it could be garnished.
3. Posted by christine on Thursday 9th July 2009 05:49
I e-mailed you on 7/7/09 abot my RV repo. I made my last payment 7/14/05.You answered me abot theSOL in Florida is 4 years.Also we have only one Checking account all transaction go thru that account. Should we close the account? how soon can the seize my account? Do you think I need to get an Attorney. thanks
4. Posted by Bill on Thursday 9th July 2009 09:48
First, if you feel like you need to speak to an attorney, do it. An attorney's time is not cheap, but the answers you get will be appropriate for the laws in your state and your particular facts. You may walk away from that meeting a couple hundred dollars lighter, but you will know your rights, obligations, and options. Second, keep in mind that the collections process is a long one. Here's a brief explanation of what you are facing. If the creditor is in another state, they need to move that debt to your state, which takes time. If they choose to pursue legal action against you, which I think is unlikely in your case, you will have a notice of that court hearing. That takes time. Finally, there's the hearing itself, which you should absolutely not miss. If that hearing results in a judgment against you, then the creditor can go about garnishing your bank account. The creditor can't seize your retirement income, but they can grab your account if there is retirement income and non-retirement funds in that account. Because it appears that the SoL has passed on the collection of the debt, it is unlikely the creditor will pursue legal action against you because if you raise the SoL issue in the hearing, the judge will prevent the creditor from collecting the debt. However, this is a defense that you must raise. An attorney can explain the exact procedure in Florida to you in greater detail.