Can Your Social Security Benefits be Garnished to Pay a Debt?


Creditors can garnish your paycheck or your bank account in order to collect on an unpaid debt, but can they garnish government benefits?

Collection agencies, court orders, garnished wages: Are these phrases that keep you up at night? If they are (or if they aren’t, but you’re delinquent on your loan payments), you may want to continue reading — especially if you collect federal benefits.

What is a wage garnishment?

If you can’t pay back a personal loan you’ve taken out, then the loan account will probably be sent to a collection agency. In certain instances, you may have to go to court. If the judge rules in favor of the lender, they will likely issue a garnishment order on your wages so the money is automatically taken out of your paycheck to pay back your debtor. If you rely on Social Security, you will be relieved to learn that those benefits are mostly exempt from garnishment.

You might have noticed the word “mostly” is doing some heavy lifting in that last paragraph. Let’s get into all of that, shall we?

The 101 on wage and bank account garnishments 

Once a borrower has defaulted on a loan, the lender will either contact the borrower directly or sell the debt to a third-party debt collector. The lender or debt collector will then attempt to retrieve the money that is due on the loan, credit card, or medical bills in question. If the borrower refuses to or cannot comply, the creditor may then take them to court.

The creditor will seek a judgment against the borrower and a garnishment in order to retrieve the amount the borrower owes. The garnishment can deduct the money directly from a borrower’s paycheck to recover the debt in addition to any additional legal or court fees the judge sees fit to include. A borrower may attempt to avoid garnishment by proposing a payment plan to the court.

There are state laws and federal laws in place that limit the amount of money that can be garnished from each paycheck. After all, the borrower still needs enough money to cover living expenses.

The creditor can also seek a garnishment directly from the borrower’s bank account — again, to be withdrawn at regular intervals. 

Social Security benefits are mostly exempt from garnishment

Section 207 of the Social Security Act protects Social Security payments from garnishment — for the most part. 

If you have a bank account filled with social security funds, they will be exempt to a point. While two of your monthly payments can hang out in the bank untouched by garnishment, a court order will allow garnishment of funds beyond that amount. However, these protections only apply to garnishments from debt collection agencies, credit card companies, and other private debts. 

While the government protects your benefits from private creditors, they aren’t so inclined to protect you when the creditor you owe is them. The Treasury Department can garnish your social security money if you have unpaid federal taxes or other government-mandated payments.

One example of nontax debt that a government agency can garnish from your Social Security payments is outstanding federal student loans that you have failed to repay. Child support and alimony can also result in garnishment of your Social Security.

These same protections and limitations hold true if you receive your benefits using a prepaid debit card instead of direct deposit.

What about other federal benefits?

Other protected benefits include:

  • Veterans benefits
  • Supplemental Security Income
  • Unemployment and sickness benefits 
  • Retirement benefits for civil service members and other federal employees.

Make sure you have proof of income sourcing

Since Social Security income is largely protected, you’ll want to make sure it is clear where your federal benefits came from in case debt collectors attempt to contest your claims in court.

This is where direct deposit comes in handy and where paper checks can trip you up. If you have your monthly benefit set up as a direct deposit, then there will be digital proof those funds are exempt. Otherwise, you may be forced to prove the money came from Social Security, which could require help from someone who can offer legal advice, whether it be a law firm with some pro bono hours to offer or a lawyer friend.

In general, it’s best to prepare for the worst with situations like these. Just because your benefits are protected from garnishment doesn’t mean your creditor will give up without a fight.

This article was updated December 6, 2019. It was originally published July 12, 2018.

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