Is SS Income Safe From Creditor?

Dear Dr. Don,My 76-year-old mother has moved to be closer to me. She's now staying with my aunt, her younger sister, who also lives in the area, but we're looking for some housing she can afford.She has the usual age-related health issues; the biggest concern is her eyesight. She's legally blind, so when we opened her bank account here, I was added as a co-signer so I could help her take care of bills, etc. While we're looking for a permanent home for her, we used my address for her (our) bank account as she didn't want her nosy sister seeing her finances. Her only income is my late father's Supplemental Security Income (SSI) payment.

A week after we opened the account, I discovered that she has an unpaid Visa credit card account that has been sent to a collection agency. I learned of this via a letter that was forwarded from her prior home address. The agency is threatening to seek a court judgment for payment of the $14,000-plus that she owes. She no longer uses the card; the charges were incurred several years ago, but interest, etc. keeps adding up.

The credit card account is solely in my mother's name. She has no assets and her only income is Social Security. However, since she and I now share a bank account, my concern is whether the creditor/collection agency could somehow attach it and my other bank accounts I hold personally (a business account) and jointly with my husband. They are all at the same bank. Should I remove myself from her bank account? Should I change the account address from my home, where she's not actually living, to a P.O. Box, perhaps?-Katie Caution

Dear Katie,Supplemental Security Income payments cannot be levied or garnished. Social Security benefits mostly can't be subject to assignment, levy or garnishment, with five possible exceptions. Section 207 of the Social Security Act provides greater detail, but the FAQ, "Can Social Security benefits be garnished by creditors to pay a debt?" on the Social Security website spells out the basics. An excerpt from that FAQ crystallizes the issue:

The Social Security Administration's responsibility for protecting benefits against legal process and assignment usually ends when the beneficiary is paid. However, once paid, benefits continue to be protected under Section 207 of the Act as long as they are identifiable as Social Security benefits using normal banking practices. For example, only Social Security benefits are deposited into a particular bank account.

If a creditor tries to garnish your Social Security check, inform them that unless one of the five exceptions apply, your benefits can not be garnished. You also may want to provide this same information to your financial institution and seek legal assistance if you believe it is needed.The key here is to not commingle deposits in the account. If the account only has SSI deposits, it'll be easier to defend the account against wrongful garnishment. Bankrate's bankruptcy adviser, Justin Harelik, paints a bleaker picture in this column and recommends against direct deposit and for receiving the income as a check. The Federal Trade Commission Consumer Alert, "Creditors Seeking Federal Benefits in Your Bank Account? Understanding Your Rights," provides some pointers if the account is frozen by her bank.

As a precaution, I'd advise that your mother bank at a different financial institution than where you and your husband bank. It really shouldn't be necessary since the creditor's claims are against your mother, and the only account with both your names on it is hers. Talk to your banker about the issue if you don't want to lose the convenience of her banking at your bank. I don't see the need for a P.O. Box.

If the account isn't set up as a convenience account then she should open up a convenience account to accept the deposits. A convenience account allows the account holder to name convenience signers on the account, but the account remains hers and is not jointly owned by the convenience signers. Her banker can provide more information. She could also decide to make the account payable on death, or POD, to a beneficiary.

As to the credit card obligations, take a look at her credit report to see how long it's been since she made her last charge. The statute of limitations may apply and she may no longer legally owe the debt. The Bankrate feature, "State statutes of limitations for old debts," provides some guidance, but you may need to consult with an attorney. Meanwhile, she shouldn't make any payments on the account or acknowledge this debt, so she doesn't inadvertently re-age the old debt, restarting the statute of limitations.

The FTC Guide for Consumers, "Debt Collection FAQs: A Guide for Consumers," provides additional background information, including how to stop creditors from contacting your mother about the debt.

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