Summary: Social security benefits are protected from garnishment by most creditors. But social security benefits may be garnished to pay child support delinquency, taxes, student loans and money owed to the federal government. Once benefits are paid and deposited into a bank account, other creditors may garnish the bank account with certain limits. Supplemental Security Income benefits are usually exempt from any type of garnishment, but Disability and Retirement benefits may be garnished in some circumstances.
Bankruptcy stops garnishment of social security benefits
Bankruptcy will stop garnishment of social security benefits. In addition, funds held in a bank account that came exclusively from social security are exempt (protected from seizure) under 11 USC 407 if the debtor is using the state exemptions. What this means is that those funds may not have to be used to pay creditors and the debtor can keep these cash funds without fear of losing them in bankruptcy.Protection of social security benefits
Social security benefits enjoy special protection under federal law. Social Security Disability and Retirement benefits may be garnished in limited circumstances. Supplemental Security Income usually may not be garnished at all. Even after the benefits are paid, the deposits are generally protected from claims of most creditor. These benefits deposited in a bank may be exempt (protected) under under both bankruptcy and non-bankruptcy law if the funds are segregated.
When can social security benefits be garnished?
While social security benefits cannot be garnished by most creditors, there are some exceptions. Child support, alimony, and federal debt, such as SBA loans, taxes, and student loans. Supplemental Security Income benefits (which are means-tested benefits) are usually exempt from any type of garnishment.
Unlike wages, even after the benefits are deposited into a bank account. As long as the recipient can prove the deposits are social security benefits, generally, most creditors cannot seize these funds up to a certain limit. Depositing these benefits into a separate account is important. If social security benefits are kept in a separate account, you may also be able to protect these benefits when filing bankruptcy. One option may be receiving social security payments on a Direct Express card. If social security benefits are deposited along with other funds, such as wages, proving how much of the funds on deposit came from social security can be hard. The burden is on the depositor to prove what portion are social security. If a writ of garnishment is issued, taking quick action is important. Failure to timely assert one’s rights to object to seizure of social security benefits may result in waiver.
How much can be garnished from social security benefits?
The amount of the garnishment depends on the type of debt being collected:
Tax debt – up to 15%
Child support – up to 65%
Other federal debt – up to 15%, but only if the monthly benefit exceeds $750 monthly
Social security overpayments – up to 100%
Bankruptcy may help eliminate or at least control garnishment of social security benefits. Reach out for a consultation to learn your options and how bankruptcy may give you relief.