Can Social Security Benefits Be Garnished?

Find out if creditors can garnish your social security benefits and what types of debts can be deducted from them.

Can Social Security Benefits Be Garnished?

If you have credit card bills, medical bills, unpaid personal loans, payday loans, etc., can Social Security benefits be garnished? In some situations, the answer is a definite no, but in others, it becomes a clear possibility. Ultimately, it depends on who makes the garrison. A commercial creditor you are in debt to takes you to court and wins a judgment against you. The creditor then asks the judge for an order to garnish your wages, bank account, and any other assets you may have to pay that debt.

Judge approves garnishment to settle debt. Are all your assets vulnerable, including Social Security and retirement benefits, such as a 401 (k) or individual retirement account (IRA)? If you are not ordered to pay back taxes or child support, the bank must review your account (or accounts) history for the two months prior to receiving the garnishment order. If your Social Security or other protected benefits have been directly deposited into your accounts within those two months (the so-called “lookback period”), the bank must protect the funds up to the total of direct deposits. You're free to spend it on anything.

However, if you continue to work, your creditor may garnish your wages and, depending on the state in which you live, other permissible assets you may have, such as a house or car. Suppose you owe the federal government back taxes. Well, the Treasury Department is a different pot of fish. You're going to have to hand over 15% of your Social Security.

Funds from a 401 (K) or IRA are also vulnerable. When your bank receives the garnishment order, you have two business days to conduct a review and identify your accounts. If the order is to collect federal taxes or child support, the bank can freeze those accounts, even if the money comes from Social Security. You can avoid garnishment by making an agreement with the IRS to pay back taxes. In that case, you will no longer garnish your Social Security benefits, although you reserve the right to do so if you don't live up to your end of the deal.

Retirement plans established under the Employee Retirement Income Security Act (ERISA), such as 401 (k)s, are generally protected from judgment creditors. The fact that 401 (k) plans are legally owned by your employer also offers some protection against federal tax liens. Only the federal government can garnish your Social Security and other federal retirement benefits. If you are in danger of such a situation, seek legal help. The American Bar Association provides links to free and low-cost lawyers who can advise you.

In general, the answer is no, creditors and debt collectors cannot garnish their Social Security benefits. Even if the creditor wins a court judgment against you for the outstanding debt, Social Security benefits are considered exempt from garnishment, says debt settlement attorney Leslie Tayne, founder of Tayne Law Group. However, there are certain types of debts that can be deducted from your Social Security benefits, such as delinquent taxes, alimony, child support, and student loans owed to the Department of Education. Borrowers write a check for the loan amount, plus fees, to the lender with the date of their next payday. Keep in mind that some payday lenders have threatened to garnish for borrowers to pay, even though they don't have a court order or judgment. An example of a non-tax debt that a government agency can garnish from your Social Security payments is outstanding federal student loans that you haven't paid. The bank or credit union withholds an amount for the payday lender or collector as permitted by state law.

Department of State, the federal government can garnish your benefits for payment of various types of debts including taxes, student loans (U. S. Department of Education), child support and alimony debts owed to other government agencies and certain civil penalties. Unfortunately for people without a bank account or people with little credit payday loans or other financial companies called alternatives such as pawnshops or car title lenders are often considered the only viable option for money in a financial emergency. If you get benefits from the Social Security Administration (SSA) and can check your payments usually qualify for a payday loan. Tax debt for example in U.

UU has a maximum repayment limit of 15% of your Social Security while student loan recovery does not have that limit Creditors holding medical bills along with personal and payday loans are also prohibited from garnishing these benefits. If you owe federal student loans your Social Security retirement and SSDI are also subject to garnishment If you don't repay your loan the payday lender or a debt collector can usually sue you to collect Unfortunately student loans are one of few debts that if you owe and don't take care of can come back and haunt you. If you owe student loans it's very important that you find a way to resolve these debts before you're forced to pay them through your Social Security checks Some economists argue that payday loans can be a reasonable solution to short-term cash crises if paid quickly. Payday lenders receive Social Security recipients because unlike part-time workers their payments are stable and reliable.

Cara Longendyke
Cara Longendyke

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