From time to time I get a call from someone whose parent has run up their credit cards even though they’re living on a limited income, such as Social Security benefits, a pension, or other retirement funds. The caller is concerned for her parent, worried that the creditor is going to take legal action. Of course, I also get calls from from retired people in this situation who don’t know what to do to keep their creditor off their back. I try my best to calm their fears. My parents are retired, and I hate to see someone like them in that position.
Before a creditor or debt collector can do anything (besides hound you with harassing phone calls), they have to file a lawsuit and sue you in court. You should know when this happens, because in Colorado a process server will come to your home and hand deliver a packet of papers for the lawsuit. At that point you have to decide how to respond. You can file an answer and try to defend the lawsuit, but your chances of winning are fairly slim if you’ve spent the money they loaned you. Your other option is to do nothing. Either way, the creditor will end up getting judgment.
Once the creditor or debt collector gets judgment, they can do a few things: garnish your paycheck or bank account and put a lien on your home. If you don’t own a home, then they can’t put a lien on anything. So we can take care of that fear right here. If you’re receiving Social Security benefits, pension funds, or proceeds from any other qualified retirement fund (like an IRA or 401(k)), they can’t take any money from you, even if it’s in your bank account.
It’s important to know that your retirement fund must qualify as an exempt fund. You can’t protect money that you put into a regular savings account that you’ve called “retirement fund.”
The bottom line is that there may not be much a creditor can do if you’re living on a fixed income except bug you about the money you owe. If you can tolerate the calls (or ignore them), bankruptcy might not be your best option, especially if you can’t afford to pay a lawyer.
If you’re still concerned with the creditors harassing you and want to file bankruptcy but aren’t sure how to afford how to pay for it, you should contact Colorado Legal Services who will connect you with a volunteer attorney who will represent you at no cost. The Colorado bankruptcy court allows you to ask for a filing fee waiver or to pay its fees in installments. We also offer a reduction in our normal fee for clients over 65.
If you’re worried about creditors taking your Social Security benefits or retirement funds, we hop you’ll come in for a free, no-obligation consultation to talk with an experienced Colorado bankruptcy lawyer. You can schedule an appointment by calling 303.331.3403 or by using our online scheduling system.