Can my Social Security be garnished?

Social Security garnishment rules

Garnishment is the legal process through which your wages or bank account funds are seized to resolve a debt. It is an involuntary type of wage garnishment that requires a court order for a debt collector to receive payment.

In addition to your wages and bank account balance, courts can garnish your Social Security benefits in some cases. There are certain times when Social Security benefits are withheld:

• Child support
• Alimony
• Restitution
• Federal student loans
• Debts to other federal agencies
• Civil money penalties by the Social Security Administration
• Fines from federal criminal proceedings

What’s more, Section 1024 of the Tax Payer Relief Act of 1997 (Public Law 105-30) allows the Internal Revenue Service (IRS) to levy up to 15% of your Social Security benefits to pay overdue federal tax debts. This continues until the debt is paid.

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What protections exist for Social Security benefits?

Your Social Security benefits are protected from most types of traditional debt, including credit card debt, personal loans and private student loans, medical debt and collection agency debt. Creditors may not legally pursue these debts using your Social Security benefits. According to The Social Security Act, your Social Security benefits may not be subject to levied or garnished unless they meet the certain requirements outlined here.

There are other ways to protect your Social Security benefits. When your benefits are directly deposited into your account or loaded onto a prepaid card, those funds are typically protected, according to the Federal Automatic Protection Rule.

The court will look at how your payments were disbursed, and if they were paid via direct deposit or prepaid card, you are generally permitted to keep two months’ worth of deposits. Any amount above two months’ payments can be frozen and seized for repayment.

Additionally, some state laws dictate whether your Social Security benefits are subject to garnishment. For example, New York’s Exempt Income Protection Act (EIPA) can protect Social Security benefits in some cases.

How does garnishment work?

When wages are garnished, it typically follows a standard process. First, the creditor will file a formal request with the court. If granted, you will receive a notice of garnishment. This explains that your Social Security benefits are subject to garnishment and will detail the total amount you owe, as well as the amount that will be garnished. Court costs and additional fees may apply.

The court may freeze your accounts, prohibiting you from accessing any funds except those beyond your garnishment. Each month, the garnishment will be automatically taken from your Social Security benefits before the rest is dispersed to you.

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How to protect your Social Security benefits

There are some things you can do to help protect your Social Security benefits.

• Keep up with your debt: Most importantly, make sure you pay all of your bills on time. Stay current on debts like taxes, federal student loans and child support to avoid garnishment in the future.
• Open a new account: Get a checking or savings account specifically for your Social Security benefits. This helps keep your garnishment separate from other income while still allowing you access to a bank account if your other one is frozen.
• Set up direct deposit: You can protect your benefits by signing up for direct deposit or having your benefits distributed via a prepaid card.

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What to do if your Social Security is garnished

To prevent your Social Security benefits from being garnished, be sure to pay your bills on time and in full. Open a new account to house your benefits, and sign up for direct deposit to protect two months’ worth of benefits. If you are facing garnishment, you do have options: file an appeal, hire a lawyer, contact your creditor directly, enroll in credit counseling, consider a debt consolidation plan or file for bankruptcy.

1. File an appeal

You can file an appeal if you do not agree with the garnishment order. This is filed not with Social Security but with the court that handled your case. Your notice of garnishment should include details on how to file an appeal if you feel you have been treated unfairly.

2. Hire a lawyer

It is best to contact an attorney for legal advice so you can choose the best path for your case. An attorney can help you with the garnishment process by representing you in court. The Consumer Financial Protection Bureau (CFPB) provides a helpful listing of state resources, or you can use the Eldercare Locator to find legal support for seniors.

3. Contact your creditor directly

You can contact your creditor directly to try to resolve the matter yourself. You may be able to negotiate a debt settlement with a lower amount due or find some other resolution that avoids garnishment going forward. However, it is typically best to leave this to your attorney so you have an experienced party negotiating on your behalf for your Social Security benefits.

4. Enroll in credit counseling

A credit counseling service can help you manage your money so you can avoid garnishment in the future. Together, you can create a monthly budget that accounts for your garnishment order and work on developing better financial habits to improve your credit score. Be sure to choose a qualified debt counselor who has experience with garnishment and has good reviews.

5. Consider a debt consolidation plan

If you can qualify, a debt consolidation loan is one way to make your payments more manageable. This combines all of your payments into one single payment that you pay monthly. You may also get a lower interest rate on your loan than you currently have on your debts, saving you money overall.

6. File for bankruptcy

You may also choose to file for bankruptcy. Chapter 7 and Chapter 13 bankruptcies are the most common types of bankruptcy, with each offering its own benefits. For example, Chapter 7 often requires liquidation of certain assets, while Chapter 13 offers a repayment plan. Bankruptcy is not typically recommended because it can stay on your credit report for up to 10 years, but it is one way to make your debt more manageable.

Bottom line

To prevent your Social Security benefits from being garnished, be sure to pay your bills on time and in full. Open a new account to house your benefits, and sign up for direct deposit to protect two months’ worth of benefits.

If your Social Security is garnished, you should contact a lawyer for help. You can also contact your creditor directly to negotiate a settlement. If you feel your garnishment is unfair, you can appeal with the court.