Q. Is my pension protected the same as Social Security when debt collectors are trying to collect from me? Can a pension be garnished?
Most of the time, pensions have the same protections from creditors or debt collectors as your Social Security benefits. However, your debt collectors could get some of your pension income through other collection activities that don’t include accessing your pension directly.
After your account ends up in collection, your debt collectors can take you to court, and if they are successful, they can get a court order against you to get their money back. Your debt collectors have various options to do so: they could garnish your wages, sell your non-exempt property and assets or seize your bank account. If your debt collectors have a court order to seize your bank account, the pension deposited in your bank account may not be protected if it does not meet the requirements established by the Employee Retirement Income Security Act of 1974 (ERISA). Most employer pensions meet ERISA’s requirements while some individual pensions, like IRAs and Roth IRAs, do not. These pensions could be at risk once they are deposited into a bank account. In addition to ERISA’s protections, each state also sets limits on the amount that’s protected from creditors. So, if you are unsure of the protections your pension has, talk to a trusted attorney and get the information you need. It’s crucial you know your rights and understand what’s the real risk to your assets.
Although it’s usually very difficult for debt collectors to seize your pension, you should still be prepared to deal with your collectors. If they have not taken you to court, you may have options to work with them directly and get to an agreement out of court. If you are unsure how to deal with your creditors, I suggest you talk to an NFCC-certified credit counselor. Your counselor can help you work with your collectors and explore debt repayment strategies that are specific to you and your financial situation. There are many debt relief strategies that can range from debt management programs to bankruptcies. It’s just a matter of finding the one that’s right for you. Remember, you don’t have to find it on your own, a counselor is a phone call away, ready to help! Good luck!
Bruce McClary, Vice President of Communications
Bruce McClary is the Vice President of Communications for the National Foundation for Credit Counseling® (NFCC®). Based in Washington, D.C., he provides marketing and media relations support for the NFCC and its member agencies serving all 50 states and Puerto Rico. Bruce is considered a subject matter expert and interfaces with the national media, serving as a primary representative for the organization. He has been a featured financial expert for the nation’s top news outlets, including USA Today, MSNBC, NBC News, The New York Times, the Wall Street Journal, CNN, MarketWatch, Fox Business, and hundreds of local media outlets from coast to coast.