Is Social Security benefits exempt from garnishment?
Under the law, social security funds are exempt, or protected, from garnishment and other actions taken by debt collectors. However, if your Social Security funds are not direct deposited into your bank account, or if you transfer the funds into another account after they are received, the protection is not automatic.
Although your credit card debt is unsecured debt and the credit card company cannot garnish your Social Security benefits, you may still have options to pay what you owe and keep your credit history from getting any worse than it may already be.
- Debt collectors are not currently obligated to advise you that they cannot sue you or legally ding your credit report if you refuse to pay stale debt.” In most states, the statute of limitations runs four to six years from the date you last made a payment. And that's the catch.
- A frozen bank account is a sure sign that a creditor or debt collector has obtained a court judgment against you (or your joint account holder, if you have a joint bank account). A creditor or debt collector cannot freeze your bank account unless it has a judgment.
- There are certain debts, however, that Social Security can be garnished to pay for. Those debts include federal taxes, federal student loans, child support and alimony, victim restitution, and other federal debts. SSI is protected from garnishment even if the creditor can garnish regular Social Security.
There are, however, some limited exceptions to this rule for certain kinds of debts owed to the government, which are explained below. Yes. With the exception of certain federal agencies, creditors cannot garnish or seize Social Security benefits, whether it is retirement, disability, survivor's benefits, or SSI.
- Under specific circumstances, the federal government has the right to garnish your Social Security benefits to pay certain debts. However, under no circumstances can a landlord obtain court approval to garnish income you receive from retirement disability.
- Your disability income is exempt from creditors, subject to a few exceptions. Exceptions. The federal government can garnish your Social Security disability benefit to recover money owed to it, such as back taxes or defaulted student loan payments that have been guaranteed by the federal government.
- If you owe back taxes to the IRS, 15 percent of your Social Security benefits can be taken each month until the debt is paid in full. The government uses the Federal Payment Levy Program to garnish your payments.
As long as you make and honor an acceptable payment arrangement with the IRS, your Social Security Disability benefits will not be garnished. In some cases, if you can demonstrate an inability to repay a debt to the IRS, you may be exempt from collection even if you owe the Federal government money.
- You will receive the backpay, and possibly retroactive benefits (payments from your disability onset date to your application date), as one lump-sum payment if you were approved for Social Security disability (SSDI). If you were approved for both SSI and SSDI, the section below applies to you.
- Disability backpay can bump up your taxable income in the year you receive the lump sum payment from Social Security, which could cause you to pay more in taxes than you should have to. First, know that many people won't owe taxes on their backpay at all because their income is so low.
- To sum it up, if you owe money to the IRS, a federal student loan program, or for back child support, some of your Social Security and pension income can potentially be taken to satisfy your debt. For most creditors, however, sources of retirement income such as these are off limits.
Updated: 2nd October 2019