The federal government can take a piece out of your Social Security benefit, but a private judgment-creditor may not. According to the Social Security Administration Web page Garnishing Social Security benefits due to a debt:
“If a creditor other than the federal government tries to garnish your Social Security benefits, inform them that such an action violates Section 207 of the Social Security Act (42 U.S.C. 407). Section 207 bars garnishment of your benefits. It can also be used as a defense if your benefits are incorrectly garnished. Our responsibility for protecting benefits against garnishment, assignments and other legal processes usually ends when the beneficiary is paid. However, once paid, benefits continue to be protected under section 207 of Act as long as they are identifiable as Social Security benefits.”
Therefore, a creditor with a credit card, mortgage, private student loan, or auto loan debt may not garnish your wages. The Dept. of Education and other federal agencies may garnish (called “off-set” by the government) Social Security benefits for delinquent federal loans. There are six instances where the federal government may garnish Social Security benefits, including:
The Social Security Administration Web page Garnishing Social Security benefits contains the exceptions I just mentioned.
The government may off-set Social Security retirement benefits and Social Security disability benefits, but not Supplemental Security Income as reimbursement for student loans. The government may not off-set an amount leaving you with benefits less than $9,000 per year or $750 per month. It may not off-set more than 15% of your total benefit.
Your Social Security income is protected from a private creditor’s garnishment. It is smart to open a separate, dedicated account or sub-account for the Social Security Administration’s direct deposits. Ask your bank or credit union to add a note to this account indicating it contains Social Security benefits, only. Do not deposit funds from other sources into this special account. Commingling exempt funds with non-exempt funds may lead to all of the funds becoming non-exempt.
Judgment creditors may not remove money deposit by the Social Security Administration from your bank or credit union account. Some states call this action account levy and others call it account garnishment. However, there is a limit to how much is exempt from levy. When your banks or credit unions receives a levy order, it must look back at your last two months of deposits and exempt two months-worth of money. Also, your bank must give you a notice of its actions, and if your state law requires it, time to dispute any funds removed from your account (CFR §212).
Your state may exempt even more than two months of Social Security benefits from an account levy. Maryland, for example, allows its residents to exempt $6,000 in their bank or credit union accounts. See the Bills.com resource Collection Laws & Exemptions to learn some of the exemptions for each state.
Many other federal benefits are exempt from garnishment, including:
For more information about the various options available to consumers who are struggling with debts, visit the Debt Help section at Bills.com. See the Bills.com article Wage Garnishment if you do not receive Social Security benefits.