They can’t attach your social security check, but they do. How to fight back.

Federal law forbids attachment of your social security check, and if a lender takes you to court for money you owe, the court will not count your social security check in figuring out how much you can pay. However, so-called paycheck lenders have found a way around this.

These lenders, who charge interest rates as high as 400% (the Mafia would be impressed), loan you money on your paycheck. You turn your paycheck over to them and they take out what you owe them. Since this often leaves too little money to pay bills, many people borrow again against their next paycheck, and on and on it goes.

These lenders have started to turn their attention to those who get social security checks. Since Social Security uses direct deposit in most cases, and since Social Security will not direct deposit into an account that is not controlled by the recipient, the lenders have you transfer your account to their bank, and their bank then transfers the money from your account to the lender’s. The lender then gives you what’s left, if anything.

You should never use this system if you can possibly avoid it. There are usually ways to get help from charities or state agencies in emergencies. Or use a credit card. Even credit card interest rates are better than the rates these people charge.

However, if you do get caught in this system, do not let them end run federal law. If you cannot make the payments, I suggest you consider bankruptcy. That will wipe out your debt. (Don’t worry about your credit rating. If you are using a paycheck lender, your credit rating is probably not worth saving.)

Whether or not you file bankruptcy, transfer your account back to your bank and do not give them access to your social security check. In many cases, if you do this, the lender will simply go away.

If they decide to summon you to court, be sure to show up. Tell the judge your story. You will probably win, unless you have some other source of income. Even then you might win because the lender often cannot provide reasonable evidence of the debt as required by law.

If you do NOT show up in court, you will probably get a judgment against you and if you do not pay up, you could actually be arrested! This is an end run around federal law. But you can stop it either with bankruptcy or simply by showing up in court.

For more information on bankruptcy, click here.

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