Money is a powerful thing that can help you build your business and improve your lifestyle. But if you misuse it, it can create problems around you and obstruct your financial growth.

People borrow money for a variety of reasons, including:
• starting a business
• paying for education
• buying a home
• investing in different companies
• buying insurance coverage
• paying for a vacation
• paying for emergencies
• consolidating multiple debts

People rarely take out loans, cash advances, or use credit cards without the intention of paying the money back to the creditor. Most people try to pay off their debts as soon as possible and with maximum savings. But sometimes, unavoidable life circumstances, such as a sudden job loss or critical illness, can derail those plans. They may suddenly find it difficult to pay their debts and keep their financial commitments.

Unfortunately, unpaid debts can create a lot of financial problems. It can negatively affect your credit score. You may also be at risk of lawsuits and often garnished wages.

A creditor may try to recover the debts from you first. If he or she fails, they may sell the debt to a third-party debt collector. The debt collector may try contacting you to recover the outstanding debt.

Can a creditor or debt collector take your veteran benefits or Social Security to recover unpaid debts? The answer is short and simple—no! Creditors and debt collectors do not have the rights to take your Social Security benefits or veteran benefits to recover debts. Whether you receive your benefits through direct deposit or a prepaid card, the funds are protected. Your benefits will be secured if a creditor or debt collector sues you, you lose the case, and receive a judgment against you.

According to, the following benefits are exempt from garnishment and bank levies:

• Social Security benefits
• Student assistance
• Veterans’ benefits
• Civil service benefits
• Military annuities and survivors’ benefits
• Supplemental Security Income, or SSI, benefits
• Merchant seamen wages
• Railroad retirement benefits
• Foreign service retirement and disability benefits
• Federal retirement and disability benefits
• Harbor workers’ and longshoremen’s death and disability benefits
• Federal Emergency Management Agency federal disaster assistance
• Compensation for detention, death, or injury of employees of U.S. contractors working outside the U.S.

Even if any of the benefits listed are your only source of income, creditors or third-party debt collectors still do not have the right to take the benefits from you. By threatening to take income from benefits, such as Social Security or VA benefits, creditors are in violation of the Fair Debt Collection Practices Act.

A few exceptions to the act
In some special cases, your income from Social Security benefits or VA benefits might be garnished. The Fair Debt Collection Practices Act does not protect your Social Security benefits or VA benefits if you owe the following debts:

• Federal student loans
• Federal income tax
• Unpaid spousal support or child support

Direct deposit of Social Security income and VA benefits in your account are protected from creditors and debt collectors. But, benefits received via paper check might put you at risk. If you have Social Security benefits, VA benefits, or any of the benefits listed as your only source of income, creditors and debt collectors can’t use the money to collect the unpaid debts. Your Social Security income, or similar benefits, can’t be garnished, and they can’t withdraw any funds from your account. However, if you owe a massive amount of debt, your creditors and debt collectors may not leave you alone. They will try other ways to collect the money you owe them.

Once your creditors sell your debts to a collection agency, it may negatively affect your credit score. Your creditor may place a lien on your properties by suing you in court to recover the debt. The court judgement won’t force you to sell your house immediately. When you are ready to sell the property, you must satisfy the lien at the time of sale.

The creditors or debt collectors may use a court order to get non-Social Security funds from your bank account. If your Social Security benefits and other funds are deposited in the same account, they might try to seize that money using a court judgment. To save the funds, your bank or credit union should protect two months’ worth of benefits in the account.

Federal and state government agencies may seize your tax refund if you owe an unpaid debt. Once you receive your tax refund, creditors might take the money as well, depending on your state’s debt collection laws.

To handle abusive creditors or harassing debt collection calls, you need to follow these tips:
First, you should set a solid budget and track where you’re spending your money each month. Decide which areas you can reduce spending and where you can cut expenses. The more you can free up cash in your budget, the more you can save to pay off unpaid debts or build an emergency fund.

Discuss your finances with a professional credit counselor. An expert can help review your financial condition and guide you. They will set up a debt management plan to consolidate all debts into a single affordable monthly payment.

The credit counselor may also negotiate with your creditors or debt collectors and reduce your overall interest rate to maximize your savings.

If you can’t find a way out, you may file for bankruptcy and protect your assets. However, bankruptcy could cause your credit to take a big hit and you might have multiple financial issues to recover from after filing it.

Lyle David Solomon is a licensed attorney in California. He has been affiliated with the law firms in California, Nevada, and Arizona since 1991. As the principal attorney of Oak View Law Group, Solomon gives advice and writes articles to help people solve their debt problems. You can connect with him on LinkedIn or tweet him at @lyle_solomon.