Credit Card Debt and Pension

Question: I have a huge $22,000 debt on one credit card.  Since I retired I have been paying the minimum payment, $250 per month.  That only covers the interest. I have another credit card with a smaller debt of about $3,000. I have two pensions, one from work $1,400 per month and my CPP $500 per month. I also have a line of credit of $10,000 which I use to make it through the month. I now realize I will never repay this debt. If I stop paying one credit card, can they garnish my pension? Will it affect my other credit card? I do not have any property, no car, only old furniture and my pension?

Pension Garnishment For Debt

In most cases it is impossible for a credit card company to garnishee a government pension. Most normal creditors cannot garnish a pension with one exception: the Canada Revenue Agency (CRA).  The CRA can garnish your pension because they view it as a setoff of debt you owe one branch of the government against money you receive from another branch of the government.

A word of caution: Once your pension is deposited into your bank account however, it’s not a pension anymore; it’s cash and any creditor can try and pursue this asset. At that point any creditor would have to attempt to get a court order to seize your bank account. Also, if your credit card debt is with the same company that you have your bank account, they can take the money directly from your bank account. They are also just offsetting one debt against your assets at the same bank.

If you bank where you owe your credit card debt, you could open a new bank account at a new bank where you don’t owe any money. Because it is difficult to obtain a court order for judgement, it is unlikely that any of the creditors will be able to pursue you further.

For more information, you can contact a credit counsellor or a bankruptcy trustee.

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