A few weeks back, our blog discussed how millennials were given the dubious distinction of being “the least credit savvy when compared to previous generations.” We also provided some tips for millennials on how to effectively manage their finances, build credit and avoid accumulating too much debt.
While the natural inclination is to think that younger people are the most likely to develop money problems, the reality is much different. Indeed, the older generation, including those who strictly followed the “penny saved is a penny earned” mindset, is in no way immune to financial difficulties.
Given this reality, there are certain issues that older people naturally have an interest in, including whether their hard-earned Social Security benefits can somehow be garnished by private parties such as banks or credit card companies.
The good news is that under Section 207 of the Social Security Act both private debt collectors and the bankruptcy courts are expressly prohibited from removing Social Security benefits from a bank account. What this essentially means is that benefits directly deposited into bank accounts — the primary payment method for most Americans — are safe.
It should be noted, however, that Social Security benefits can be garnished by the government to pay everything from back taxes and federal student loans to child support and alimony obligations.
As discouraging as this may be to learn, consider that the Debt Collection Improvement Act of 1996 dictates that while the federal government can take up 15 percent of benefits to cover most debts, it must leave at least $750 untouched each month.
However, it must also be noted that this $750 minimum doesn’t apply as far as payment of back taxes is concerned, while the individual states have their own laws dictating that more can be taken to cover divorce-related obligations like child support and alimony.
Just as we said with millennials, it’s important for older people to remember that they do have viable options in the event their debt becomes unmanageable and that their age doesn’t preclude them from a fresh start.