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Advice Regarding Pensions and Credit Card Debt

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Mark Cappel
UpdatedDec 6, 2022
What happens to credit card debt if someone is on old age pension only and has no assets?

What happens to $12,000 credit card debt if someone is admitted to long-term care in a nursing home is on old age pension only and has no assets? The cost of the nursing home uses her pension leaving only $120 dollars a month.

The laws covering what funds are protected against the collection actions of creditors vary from state to state, and I would strongly encourage you to consult with an attorney in your area regarding your specific situation.

That said, generally speaking, funds like social security benefits, disability benefits, and pension proceeds are usually exempt and cannot be garnished by creditors. However, if you deposit those benefits into a bank account and then co-mingle the funds with money from other, non-exempt sources, you may be putting the all the funds at-risk, including the pension funds.

My suggestion is to open a new bank account into which only pension funds are deposited, and maintain another account for any non-exempt funds received (gifts from friends, family, etc.). Taking this step, along with the fact that you state that the debtor in question has no assets, will make it unlikely that a creditor can do anything legally to force a payment on the debt.

I will say it again because it is important: Discuss the situation with an attorney licensed in your state to determine specifically what steps you need to take to best defend yourself against possible collection actions.

Good luck and hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

www.bills.com/

Struggling with debt?

Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q2 2022 was $16.15 trillion. Auto loan debt was $1.50 trillion and credit card was $0.89 trillion.

A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by Urban.org from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.

Each state has its rate of delinquency and share of debts in collections. For example, in New Jersey credit card delinquency rate was 3%, and the median credit card debt was $430.

Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.

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2 Comments

BBill, Jun, 2009
Yes, you would still be subject to collections and the possibility of a lawsuit. R9 or chargeoff status is an accounting term and a credit rating term, but does not correlate at all to the creditor's ability to collect or attempt to get you to repay.So, I am sorry to report to you that the answer is yes. bill
aangela sestak, Jun, 2009
Once a credit card is charged off as a bad debt, do I still have to pay it?