Expert: Regan Shinski - 11/23/2009

Question
I am a disabled veteran, 100% unemployable, three of my credit cards have been raised to 32%apr and I am disputing the hike and refusing to pay until I can get a reduction.  I have been a customer of two of these cards for over 10 years with three different banks.  My wife has a school loan she has been paying on for 10 years that has never reduced form 20k even though she has paid 11k on it.  I received disability benefits, ccrc and retiredment.  my wife works full time.  We live in North Carolina in a home we bought four years ago and owe 130k on. My diability checks/retirement and ccrc are all direct deposit in my credit union, as is my wife's payroll check.  Can my checking account be frozen? Is my house at risk? Any help you can provide would be appreciated.

Answer
Dear Chet:

Those assets are only at risk if they sue you and get a judgement against you.  Even then, they can be protected to a certain degree.

The first thing I would do is create an account where ONLY your disability and retirement wages are deposited.  I don't care if you deposited $5 in cash eight years ago, that account then is not longer protected!  You must ONLY deposit those types of funds and tell the bank what the account is for.  Make them put a note on the account.  Those types of income are not allowed to be confiscated to collect on a judgement IF the account is ONLY used for those funds.  You have said your wife's wages are deposited, so ALL funds in that account would be at risk if a judgement is obtained.  

Again, they have to get a judgement first, so you don't seem to be at immediate risk based on what you have told me.  If they get a judgement, they do have other options in NC.  They can garnish your wife's wages for her or joint debt.  A lien can be placed on your property and, in theory, they could force a sale of your home if there is sufficient equity.  Both of these are cumbersome for the creditor to do and you have options - including bankruptcy - to stop them cold.  Because of this, creditors typically do not pursue the lien on property but they could if they are aggressive.

Another option is executing the judgement.  This means they can hire law enforcement to collect personal property items such as cars, tv's, computers, and other tangible items.  The sheriff's office basically holds them, determines ownership, and then sells them at auction to pay off the judgement.  Again, you have some exemption and appeals options, so I am giving you a worst case scenario.

All these options can be only used AFTER they collect a judgement against you so be aware and don't ignore court proceedings or documents.

Good luck, I hope this helps.  Thanks for your military service :)

Regan
mbscompany@aim.com