can non-taxable income be garnished?

[jim]

My friend is about 10-12k in debt. Receives some income, ss and maybe a small pension. Pretty sure none of it is taxable. He only pulls in 900 per month.

So - he was thinking of filing bankruptcy, but then the fee may be anywhere from 1k-2k, and you end up with bad credit.

So the question is, can non-taxable income be garnished?

If it cannot, does it make sense to just ignore the creditors? They can't garnish his wages, so all that can happen is he will end up with bad credit, which he will get in either case.

He is already 82 years old and doesn't own anything creditors can go after and he doesn't need credit for future purchases....

Thanks in advance for any feedback.

[justbroke]

It depends on the State where the Debtor lives as to whether pension earnings or other retirement income is exempt from garnishment.

Basically, you can't garnish Social Security benefits. His small pension may also be untouchable (local law or Plan provisions).

You will want to look into this at your State's level.

[jim]

He resides in California.

[justbroke]

He resides in California.

Hopefully, a Californian chimes in shortly. The question will be on his Pension account and disbursements. (From what I understand, California doesn't have an exemption for pension accounts. However, there are limits on what they can take based on living costs and there are some Federal "minimums" that you can't take from a person's income regardless of the garnishment. I don't recall the exact multiplier, but it's like 15 times the (federal) minimum hourly wage. I know in Florida, we have exempted the first $500 of wage earners amount.)

To me, sounds like he is judgment proof. This means that they can come after him, but there's nothing tangible for them to lien or garnish!

[junker]

it does sound like he is judgement proof, BUT, being judgement proof doesnt mean they wont try and get something such as go after his bank acct, and make him prove everything is exempt. it could cause him a great inconvience, even though eventually he would probably get it back. i closed my bank acct and cash my govt pension at walmart.

[magyar123]

Google the "Rosenthal" debt collection law. Will go into detail of what/what not is subject to creditors' theft in California.

[GoingDown]

$900 per month in California won't go very far, so I would think the entire amount would be considered exempt, but he will have to fight the garnishment in court-- usually a simple matter of responding to the garnishment papers served on him and the employer, they often include the appropriate forms in the paperwork.

And yes, definitely close the checking account and savings account. The checks can be cashed at Wal-Mart, or Social Security can issue a debit card for people who don't have a checking account and they are safe from garnishment.



P.S.-- he doesn't have to do any of this until they actually file a lawsuit against him. He will then have about 20 days to close accounts, etc. before they can garnish anything. And most likely, they won't bother suing him anyways. They only sue about 5% of defaulted debtors nationwide, so the odds are actually against being sued.

[treehugger1]

Always best to error on the side of caution. Close bank accounts. One can always get a prepaid debit card that also allows bill-pay, but nost utility, cell phone, insurance comoanies, etc, will take a 16 digit mastercard or visa number. It is not relevant to VISA or MC if the account is credit or debit. These folks are just a "money transfer" system. As mentioned SS is going to a prepaid debit card type of account. Technically, these are not "bank accounts" (my understanding) but still there has to be some nine digit routing number and account number somewhere that is different than the 16 digit card number. Not sure how this works. But, my understanding is that such debit accounts are not considered bank accounts. Maybe someone can chime in here, or perhaps I'll start a new thread looking for thoughts from others. The prepaid debit card business is booming in this country. I can imagine why!

In my state pensions are exempt and up to $7500 of bank deposits of exempt funds are protected. I'm not so sure I'd want to test the $7500 of exempt deposits in a bank account, LOL. Probably better to buy some walmart, western union, etc prepaid debit cards to store your exempt funds.

Creditors can move quite quickly if they are local. I have plenty of experience to back that up. Other than that, big national creditors can take a while to move through the system. If your friend is in a position that makes a judgment hard to enforce, then even a judgment or two is not the worst thing that can happen.

[BigJohn]

One of my credit reports claim I was born in 1932 which means I must be 76 years old. I think I woud be stupid to try to get that corrected.

[treehugger1]

Big John, Yep, there are some credit reporting issues that one might leave uncorrected, LOL. I have several judgments that have been staisfied, but none of the credit reporting agencies are reporting these as paid. In my current situation, I like the looks of the "unpaid" judgments on my credit report.
As to the original post: It appears that your friend wants to not pay their bills and minimize the credit reporting damage. I don't think you can have both of these. The quickest way for a defaulted debtor to fix their credit is to probably file for BK. Even then, it will be several years before their credit worthiness begins to improve. One should default on debt knowing the price to be paid is a loss of credit worthiness.

[Clacton]

So long as the garnishment is not for Child Support or Alimony, a California Government Pension cannot be garnished.

[BigJohn]

Jim, does your friend live in an apartment?

Is some of his debt related to a vehicle?