If you default on your unsecured credit card debts, what action the creditors will take completely depends on the due balance you are carrying on your cards. For instance, if you owe something around $5,000 or more than that, it is likely that the creditors will initiate each and every collection step to get back the amount from you. This means garnishment of wages or bank accounts or property liens. However, if the amount is smaller, it may not worth the time and money of the original creditor. In case of smaller loans, accounts usually get resold to companies specialized in debt collection. Therefore, before defaulting on any loan it is wise to talk to the creditor to see if any affordable payment plan can be worked out.
Regarding your Social Security payments, some recent regulations by the Department of Treasury require banks to protect federal benefit payments from garnishment that are straight-deposited into a bank account unless it’s the federal government whom you owe.
Generally, if a bank receives a garnishment order, it must review the account thoroughly and protect any federal benefit from getting garnished that deposited into the account during the last two months. Therefore, say if you receive $1,500 as Social Security benefit each month through direct deposit, an amount of $3,000 or less in your account will be safe. Before enactment of this rule, the banks could freeze your entire account until you proved that some of the money in it was from Social Security benefits.
Your other pension benefits are secured as long as they are federal pension benefits. For instance, Federal Employees Retirement System or the Veterans Affairs pension program.
If your creditors are not eager to work out a repayment plan with you, seek help from a nonprofit credit counseling agency and see what help they can do to you. If this attempt fails, consult a good bankruptcy attorney to avoid wage garnishment in the best possible way.