Having a lot of credit card debt can be worrisome, particularly if you don't have many assets and have a limited income. While it is possible that a credit card company, or its collection agency, might file a lawsuit, it is unlikely that it will be able to collect much, if anything from you. State and federal laws make it impossible for most creditors to garnish or seize Social Security income and assets.
Social Security Disability Programs
Supplemental Security Income (SSI) is a federal benefits program administered by the Social Security Administration that provides benefits to elderly, blind or disabled people who have a very low income. Social Security Disability Insurance (SSDI) provides disability benefits to those who paid into the Social Security system long enough to qualify. SSI income is protected from garnishment by all creditors, and SSDI income is protected from garnishment by most creditors, with the exception of repayment of certain tax, child support and student loan debts.
Court Summons
If you receive a summons to court, don't ignore it. Seek legal advice if possible. Your local legal aid society may be able to help you. If you or your lawyer inform your creditor that your income is exempt from garnishment, the creditor may dismiss the lawsuit. If your creditor wins a judgment against you, you need to prove to the judge and creditor that your income is from exempt sources, so bring documentation showing the source of your income to court.
Time Frame
Once a creditor has a judgment against you, it can continue collection efforts until the statute of limitations on judgments has expired in your state. The statute of limitations on judgment collections can be very long in some states, and it can often be renewed by a judge. This means that your creditor may have decades in which to try and collect a judgment from you. If your circumstances change, prepare to hear from your creditor.
Credit Reporting
Late payments, charge-offs and paid judgments can remain on your credit report for up to seven years. If your judgment remains unpaid, it can stay on your credit for seven years or the length of the statute of limitations on judgments in your state, whichever is longer. This can have serious and long-lasting effect on your credit score.
Prevention/Solution
While it may be difficult for a creditor to collect a debt from you, the fallout of unpaid credit card debt, such as property liens, collection calls and a bad credit report, can be ugly. If you find yourself in serious debt, consider negotiating a settlement with the credit card companies, either on your own or with a credit counselor.
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