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Garnishing Social Security

By Jennie L. Phipps ·
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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Bob R.
April 21, 2011 at 3:12 am

As you pointed out, SS is not supposed to allow an offset ("garnishment")on non-federal debts, although some creditors may have found a way around this rule.
Because of my federal student loans my monthly check has dropped from about $1,200 per month to $750 per month. $750 is the lowest SS will allow as being a "livable" income.
Of course, the student loan people also take any federal tax refund to which I would otherwise be entitled, but they never take my state refund.

April 21, 2011 at 2:08 am

Have to agree with Arnie that SS has always been protected from garnishment. Sadly, most people don't know it. Having subsisted on SS disability for 20 years is not fun, but I figure that since my parents, my husband's parents and my brother never got a dime from their lifetime of SS deposits, I am not feeling guilty about it (Abby). Most of us don't get the opportunity to default on loans either, as we don't get them without a co-signer.

Poor Abby sounds as if she has bigger problems than worrying about us folks with our "protected" social security accounts.

April 18, 2011 at 1:26 pm

all people are dishonest abby what kind of business u own you crying awful hard there. bet you not crying about that big tax break you are getting and cheating on every year

Arnie Miller
April 17, 2011 at 11:52 pm

All SS money in your checking acct. is protected per Section 207 of the Social Security Act (42 U.S.C. 407). That's ironclad but you still have to prove that all the $$$ contained in the acct. is from SS.

What some sleazy creditors do is put a FREEZE on your account thereby starving you of needed food and medicine as you have no access to your money. Getting it unfrozen is a bitch but doable. Perhaps not so easy sans a (costly) lawyer for many folks. The new "rules" say the bank has to allow access to (withdrawal) your last two SS deposits, assuming they were direct deposits.

Best advice is to open and maintain a single checking account for all your direct deposits which are protected and only leave up to two months worth of deposits on hand. You thereby eliminate any argument as to what money is from what source. Where you move (and the balance is up to you. If you take your SS via a Social Security Debit Card then you bypass the banks whose acct. could be subject to a freeze.

Dick H
April 16, 2011 at 6:43 pm

get what from the system?You pay for your kids education. You pay for the Marines to protect your sorry ass. You pay for the cops. you pay for the fire department. And so it goes. You get much.much more from the system than just social security when you get old-if you do live to get old. which with your attitude is no sure thing

April 11, 2011 at 6:10 pm

Not sure why people unable to garnish social security makes people dishonest with no consequences..... My parents live on social security and make their bills.... their vehicle could still get repossessed if they hadn't paid it off, and they can still lose their home if they do not make regular monthly payments. It just means that if my step-dad were to pass, and my mother's income were to be cut by more than half, they aren't going to take the food out of her mouth in order to pay some store credit card. And before you say something about insurance for such things, my father is over 70 years old. He doesn't qualify for it in most cases.

March 31, 2011 at 11:54 am

This will make credit difficult for people on fixed incomes. That is probably a good thing. I do not intend for that to be a harsh statement, there is quite a bit of what I perceive to be predatory lending available right now. Better to have no credit than to pay exorbitant interest rates.

March 31, 2011 at 10:24 am

people can be very closed minded. I am on social security disablity I got hurt and now unable to work. My credit was always in my means when I got hurt I wasn't able to survive on my new income. So creditors or providing for my family. That was a no brainer. What would you do? Maybe you need to wear my shoes and maybe your outlook would be different. If that is possible.

Matt R
March 30, 2011 at 10:22 am

@MF, V, who said, "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."

Um, as long as some give more than you do, right? Those making over $106k are already giving more than their share - more than they will *ever* see from the system.

March 28, 2011 at 12:23 am

Looks like another means for people to be dishonest with no consequences. Why shouldn't a person have to pay back a Private business? Unbelievable. Our government is truly made up of a bunch of idiots.