On this page
What's next
Earn a high-yield savings rate with JG Wentworth Debt Relief
Can a Pension be Garnished for Credit Card Debt?
by
JG Wentworth
•
February 28, 2025
•
4 min
Credit card debt can be a significant source of stress, especially for retirees living on fixed incomes. One common concern is whether creditors can garnish pension benefits to satisfy outstanding credit card debt. The answer involves various federal and state laws, the type of pension you have, and specific legal protections in place…
Federal protections for pension benefits
Most pensions enjoy strong federal protection against garnishment. The Employee Retirement Income Security Act (ERISA) provides substantial safeguards for private employer-sponsored pension plans. Under ERISA, qualified pension benefits are generally protected from creditors, including credit card companies.
Federal pension benefits are protected by federal law from most types of garnishment, such as:
- Social Security retirement benefits.
- Veterans Administration (VA) benefits.
- Civil Service Retirement System (CSRS) benefits.
- Federal Employees Retirement System (FERS) benefits.
There are a few exceptions to keep in mind, such as as federal taxes and child support obligations.
State pension protections
State and local government pensions typically have their own set of protections under state law. While the level of protection varies by state, many provide similar safeguards to those offered by ERISA. Some states offer absolute protection against garnishment, while others may provide partial protection or set specific exemption amounts.
When pension benefits become vulnerable
While pensions are generally protected in their retirement accounts, the situation changes once the money is distributed and deposited into a regular bank account. At this point, the funds may become vulnerable to garnishment, depending on several factors:
- Commingled funds: When pension money is mixed with other funds in a regular bank account, it may lose its protected status. To maintain protection, some financial advisors recommend keeping pension benefits in a separate dedicated account.
- State-specific time limits: Some states provide temporary protection for pension funds after they’re deposited into a bank account, typically for a specific period (often 60 days). After this period, the funds may become subject to garnishment.
- Voluntary payments: While creditors cannot directly garnish protected pension benefits, nothing prevents you from voluntarily using your pension income to pay credit card debt.
Steps to protect your pension
If you’re concerned about potential garnishment of your pension benefits, consider these protective measures:
- Keep documentation: Maintain clear records showing which funds in your bank account came from pension benefits. This documentation can help prove the protected status of your money if challenged.
- Separate accounts: Consider maintaining a dedicated account for pension deposits, separate from other funds, to help preserve their protected status.
- Know your rights: Familiarize yourself with both federal and state laws regarding pension protection in your jurisdiction. This knowledge can help you respond appropriately if a creditor attempts garnishment.
Take your next step towards being debt-free
"*" indicates required fields
Alternative solutions for credit card debt
Rather than risking pension funds, consider these alternatives for managing credit card debt: Debt management programs: Work with a nonprofit credit counseling agency to develop a structured repayment plan with potentially lower interest rates. Negotiate with creditors: Many credit card companies are willing to negotiate reduced payoff amounts or modified payment terms, especially if the alternative is bankruptcy. Bankruptcy protection: While generally a last resort, bankruptcy can provide a fresh start and stop collection attempts, including garnishment threats.The bottom line
While pension benefits generally enjoy strong protection against garnishment for credit card debt, these protections aren’t absolute, particularly once the money is distributed. Understanding your rights and taking proactive steps to protect your benefits can help ensure your retirement income remains secure. If you’re facing credit card debt problems, consider consulting with a financial advisor or legal professional who can provide guidance specific to your situation and jurisdiction. They can help you understand your rights and develop an appropriate strategy for managing debt while protecting your pension benefits.There’s always JG Wentworth…
If you have $10,000 or more in unsecured debt there’s a good chance you’ll qualify for the JG Wentworth Debt Relief Program.* Some of our program perks include:- One monthly program payment
- We negotiate on your behalf
- Average debt resolution in as little as 48-60 months
- We only get paid when we settle your debt
About the author
Recommended reading for you
* Program length varies depending on individual situation. Programs are between 24 and 60 months in length. Clients who are able to stay with the program and get all their debt settled realize approximate savings of 43% before our 25% program fee. This is a Debt resolution program provided by JGW Debt Settlement, LLC (“JGW” of “Us”)). JGW offers this program in the following states: AL, AK, AZ, AR, CA, CO, FL, ID, IN, IA, KY, LA, MD, MA, MI, MS, MO, MT, NE, NM, NV, NY, NC, OK, PA, SD, TN, TX, UT, VA, DC, and WI. If a consumer residing in CT, GA, HI, IL, KS, ME, NH, NJ, OH, RI, SC and VT contacts Us we may connect them with a law firm that provides debt resolution services in their state. JGW is licensed/registered to provide debt resolution services in states where licensing/registration is required.
Debt resolution program results will vary by individual situation. As such, debt resolution services are not appropriate for everyone. Not all debts are eligible for enrollment. Not all individuals who enroll complete our program for various reasons, including their ability to save sufficient funds. Savings resulting from successful negotiations may result in tax consequences, please consult with a tax professional regarding these consequences. The use of the debt settlement services and the failure to make payments to creditors: (1) Will likely adversely affect your creditworthiness (credit rating/credit score) and make it harder to obtain credit; (2) May result in your being subject to collections or being sued by creditors or debt collectors; and (3) May increase the amount of money you owe due to the accrual of fees and interest by creditors or debt collectors. Failure to pay your monthly bills in a timely manner will result in increased balances and will harm your credit rating. Not all creditors will agree to reduce principal balance, and they may pursue collection, including lawsuits. JGW’s fees are calculated based on a percentage of the debt enrolled in the program. Read and understand the program agreement prior to enrollment.
This information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that you consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.