Receiving disability payments does not protect you from a credit card company’s lawsuit -- but it may deter legal action from both the original creditor and any third-party debt collection agency that purchases your delinquent account. A credit card company or collection agency’s ability to force an individual receiving disability to pay off his debt via a lawsuit is limited.
How It Works
Credit card companies that file suit against consumers do so with the goal of obtaining a civil judgment through the court. If the court awards the creditor a civil judgment against you, the credit card company or collection agency can use the judgment, as a tool, to garnish your wages and seize funds in your bank accounts.
While judgment creditors reserve the right to garnish wages, disability payments are not wages. They are a government benefit awarded to you based on your inability to work. As such, disability payments are immune from garnishment. Federal law also prevents creditors from seizing your disability payments directly from your bank account via a bank levy.
Even though your disability benefits are exempt from debt collection, property you own is not. After obtaining a judgment, the creditor can place a lien against your home or vehicle -- preventing you from selling or refinancing the asset until you pay off the debt. If you do not own real estate or a vehicle, the creditor has no method of forcing you to pay off your delinquent credit card debt -- even if it wins a lawsuit against you. When a judgment creditor cannot use a civil judgment to force a debtor to pay a debt, that individual has “judgment-proof” status.
Avoiding a Judgment
If you are judgment-proof, suing you is not in your creditor’s best financial interests. Unfortunately, the judgment resulting from the lawsuit will still appear on your credit report and damage your credit rating -- even if the lawsuit did not further the creditor’s debt collection ability. Upon filing its lawsuit, the creditor must provide you with a court summons alerting you to the time and date of the court hearing. If you respond to the court summons, notifying the creditor that you do not receive wages, only disability, the creditor may determine that it cannot use a civil judgment to successfully collect from you and drop the lawsuit. All credit card companies’ policies vary regarding when to pursue debt collection lawsuits and when to drop them.
- Bankrate: Garnish My Disability Check?
- Lawyers.com: What It Means To Be Judgment Proof
- Consumer Financial Protection Bureau. "What Is a Judgment?" Accessed March 16, 2020.
- Consumer Financial Protection Bureau. "What Is a Statue of Limitations On a Debt?" Accessed March 16, 2020.
- Texas Law Help. "What Is an Affirmative Defense?" Accessed March 16, 2020.
- Federal Trade Commission. "Time-Barred Debts." Accessed March 16, 2020.
- The Florida Bar. "The Life of a Money Judgment in Florida Is Limited for Only Some Purposes." Accessed March 16, 2020.
- Virginia Law. "§ 8.01-251 Limitations on Enforcement of Judgments." Accessed March 16, 2020.
- Consumer Financial Protection Bureau. "How Long Does Negative Information Remain on My Credit Report?" Accessed March 16, 2020.
- Consumer Financial Protection Bureau. "What Is a Garnishment?" Accessed March 16, 2020.
- Consumer Financial Protection Bureau. "Can a Debt Collector Take My Social Security or VA Benefits?" Accessed March 16, 2020.
- County of Napa. "Real Property Levy - Writ of Execution." Accessed March 16, 2020.
- U.S. Marshals Service. "Service of Process: Writ of Execution." Accessed March 16, 2020.
- National Association of REALTORS®. "What Is a Property Lien? An Unpaid Debt That Could Trip Up Your Home Sale." Accessed March 16, 2020.
Ciele Edwards holds a Bachelor of Arts in English and has been a consumer advocate and credit specialist for more than 10 years. She currently works in the real-estate industry as a consumer credit and debt specialist. Edwards has experience working with collections, liens, judgments, bankruptcies, loans and credit law.