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Garnishing Social Security

By Jennie L. Phipps · Bankrate.com
Monday, February 28, 2011
Posted: 5 pm ET

Here's an off-the-wall retirement planning wrinkle.

New rules take affect May 1 that make it much harder for creditors to garnish Social Security, veterans pensions, Supplemental Security Income and Social Security Disability from recipients who owe them money.

The new U.S. Treasury rule requires all banks to determine whether an account contains these protected funds. If an account contains protected funds, the bank is required to protect two months' of benefit payments from garnishment. Protection of more than two months' of benefit payments requires additional court filings and in practice, makes these funds immune from seizure by creditors, says Margot Saunders, an attorney for the National Consumer Law Center.

It works like this. You fail to pay your car payment and the car dealer comes and takes the car, then he sues and gets a judgment against you for the remainder of what you owe him. He goes to the bank and attempts to garnish your money. Under the new rule, the creditor can pick any day he wants for the garnishment and the bank must respond by looking at your account for the previous 60 days. Let's say you received a $1,100 Social Security payment one month and another $1,100 Social Security payment the next month. That $2,200 is protected. If there is any other money above and beyond that amount that has been deposited in the account during that period and is still sitting there, the creditor gets it. If there is no other money, the creditor is out of luck. He gets bupkis.

There are two exceptions, Saunders says: money you owe Uncle Sam and money you owe in child support. If you have these kind of debts, an attorney or the IRS can petition Social Security directly and collect.

If a debt collector begs to differ, Saunders points them to this statement on the Social Security website. She says garnishment of Social Security has always been against the law, but creditors have found ways around it. This change in the rule should eliminate those loopholes. On the other hand, if you fear you might find yourself in this kind of debt-collection dilemma during your retirement, the best way to protect yourself is to have your Social Security check deposited into an account that you don't use for anything else.

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22 Comments
Pam D
March 24, 2011 at 11:25 pm

I don't like when people owe money and "don't feel a responsibility to pay" their debts even though they are able to. Lame excuses to avoid paying debts is wrong on so many levels. That's why we are in the situation we are in. If you owe it, pay it! I do think that taking large amounts in a short amount of time to pay off a debt is harsh on the debtor.

Jennifer Gardner
March 17, 2011 at 6:54 pm

I had over $1300 garnished, but it only had a pell grant and child support for my daughter in the account, so I had to fill out a form and send 1 copy to the court and 1 to the attorney and they had to send me back the money. It's almost off my record any how (it was done in 2005) and I'm a college student. I just got married to someone who makes a high six figures (so I won't get any college aid next year) but it was done before I was married and we don't have a joint account, so they can't get his money. The collection agency was shady and got a judgment by serving me at my old work place and I didn't know I missed a court date, so I don't really feel bad for them, nor do I feel a responsibility to pay them, when they didn't seem to care when I told them that I wasn't even properly served (I was on unemployment at the time, so I could prove I didn't work there at that time...).

Denise L
March 12, 2011 at 1:24 am

Owing the IRS, child support...AND owing Federal student loans in default are grounds for direct garnishment of one's Social Security check. SSI checks cannot be garnished. Kind of ironic that a regular Social Security disability check (you have worked and paid into Social Security) can be garnished, but an SSI check; which is basically public assisatnce,(you either didn't work at a job that paid into SSA, or you did not work long enough) CANNOT be garnished. Bank accounts can be garnished by creditors with a court judgement,but they cannot directly garnish one's SSA check; which is why so many people still want paper checks.

Clyde Point
March 09, 2011 at 8:20 pm

ANY entitlement should be up for garnish. ANY; if your going to take Soc. Sec. Already VA Disability payments are considered income and can be garnished by Courts(Ohio). Soc. Sec. Disability payments are considered income and can be garnished by Courts(Ohio). Congress stated "DISABILITY" payments are NOT INCOME; but the Courts don't care. So there is Soc. Security, and Soc. Sec., disability; they are
different. If that is the entire amount one lives on; then that should be exempt. Even if you go bankrupt; your left something; to live in. How about something to eat! If Social Security is garnished; then Welfare, Housing allowances, food allowances, ANYTHING the government hands out should be 'garnished'. That would be fare.

anonymous
March 04, 2011 at 10:25 am

All states are different what is allowed in terms of debt collection. I live in PA. In PA if you are married, which I am and owe a debt then the creditor can only touch the accounts that are in your name only if the debt is in your name. Therefore, everything I have is in mine and my wife's name, but the debt is only in my name. If the debt collector was to get a judgment they wouldn't be able to collect. Also, PA doesn't allow wage garnishment either. The downside is that once a judgment is entered against it can be renewed forever, so it is unavoidable to have to pay somewhere down the line. This is why you have to hire a lawyer and challenge any debt collection lawsuit. Most collectors don't have what they need to legally collect and a lawsuit give you an opportunity to get a court dismissal on the debt, which would kill the debt indefinitely. Sometimes the statute of limitation expires before the lawsuit. If you can prove this in court the judge will dismiss it. It is never a good idea to ignore a lawsuit because once a judgment is entered it is hard to reverse.

Don McKinnon
March 01, 2011 at 4:56 pm

Any creditor with a judgment can garnish your bank account. That judgment could be for a balance owed after repossession. To the extent that a bank account consists of Social Security, it can be protected from garnishment with a lawyer's help. The new rule will protect two months of Social Security benefits without a lawyer's help. Few people on SS build up much more than that, but if they do a lawyer can still help. Sorry, Dariene

Wesley D Wornom, Attorney
March 01, 2011 at 3:59 pm

In Virginia, creditors do this all the time. In Virignia, a creditor with a judgment for any type of debt can garnish bank accounts, including but not limited to, credit card judgments, mortgage deficiency judgments, and car loan deficiency judgments. All general creditors can take up to 25 percent of a person's take home pay as well. Debtors do have some exemptions from garnishment of bank accounts or wages under state and federal law, but these limit, don't stop garnishments.

Milton Friedman, V
March 01, 2011 at 2:01 pm

Why can't economist/political hacks of today consider more than 'RAISE the AGE'???
How about raising the Income amount of $106,800? If SSI is in trouble, as it sounds, it should be Common sense to raise the amount that can be taxed. Time for those making more than $106,800 to also be taxed on their high incomes. Times are tough and we all have give a little.

And don't give me the tired ol line that it will dis-incentivized higher incomes.........tough cookies.
Thanks------Milton

Mike G
March 01, 2011 at 11:38 am

Either it's a legal debt or it isn't. I've never understood why the government and child support get preferential treatment over private individuals or businesses when it comes to debt collection. Seems unconstitutional. It's these types of one sided regs that are chasing business and employment overseas.

Dariene Laux
March 01, 2011 at 12:24 am

Since when can a creditor garnish your personal accounts? The IRS I understand but if a car dealer takes back the car (unvoluntary reposession or even voluntary) and they put a judgement or lien against you personally I've never heard of them being allowed to go any further than that. The judgement would most definitely be a problem if someone wanted to get another car, buy a house etc and would most likely have to pay it off but that's as far as I thought they could go. If they can do this then this is new to me. I live in the state of Florida and I have never seen this happen.