Generally speaking, pensions cannot be garnished, except for child support. Let us look at the rules and facts in your situation.
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.
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.
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. 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 a new 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 hope this information helps you Find. Learn & Save.