Once Your Benefits Hit Your Account
While debt collectors can’t directly touch your Social Security benefits, they can get a court order to tap your bank accounts to recover the amount owed.
Generally speaking, banks and credit unions are required under federal law to ensure that any Social Security funds electronically deposited in the previous two months are protected from those court-ordered garnishments. However, if you transfer the money to a different account, or the money remains in your account for more than two months, it could be fair game for debt collectors.
“If you’re hit with a garnishment order, you should seek legal counsel and be sure to respond to by asking that the Social Security funds are protected,” said Lauren Saunders, associate director at the nonprofit National Consumer Law Center.
Can My Social Security Benefits Be Garnished For Alimony Child Support Or Restitution
We can withhold Social Security benefits to enforce your legal obligation to pay child support, alimony or restitution. State laws determine a valid garnishment order. By law, we garnish current and continuing monthly benefits. We do not make retroactive adjustments.
You cannot appeal to Social Security for implementing garnishment orders. If you disagree with the garnishment, contact an attorney or representative where the court issued the order.
Delinquent taxes
The Department of the Treasury can withhold Social Security benefits to collect overdue federal tax debts. It can use:
- A Notice of Levy to collect overdue federal taxes under section 6334 of the Internal Revenue Code or
- The Federal Payment Levy Program to collect overdue federal taxes. This allows the Department of Treasury to withhold up to 15 percent of your monthly Social Security benefits until you repay the debt.
You cannot appeal the reduction of a Social Security benefit payment under tax levy to Social Security. Contact the Internal Revenue Service at 1-800-829-7650 to discuss any appeal rights.
Delinquent non-tax debts
The Department of the Treasury can withhold Social Security benefits to collect delinquent non-tax debts owed to other federal agencies under the Debt Collection Improvement Act of 1996 . The Department of the Treasury controls this activity and will contact you if you owe a non-tax debt.
Garnishment By Other Federal Agencies
Federal agencies like the SBA, FmHA, VA, USDA and RDA can also offset 15% of a persons Social Security. There is no statute of limitations and this offset can occur decades after the debt became due. A minimum of $750 in Social Security income is protected from garnishment, unchanged since 1996. Unlike IRS and student loan debt, there is no program available to stop a garnishment of Social Security for these other agency debts on account of low income or poverty. The garnishment can be stopped through bankruptcy. Once again these types of garnishments are rare, but Eric Olsen, Executive Director at HELPS tells me that an increasing number of seniors are faced with these garnishments.
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The Bank’s Duty To Review Your Account
Here’s how it works. When the bank receives a garnishment or attachment order, the bank has two business days to conduct a review. It must identify your accounts and then determine if the garnishment order is to collect child support or federal taxes. If so, the bank may freeze your funds, even if they come from Social Security.
Can Social Security Benefits Be Garnished To Pay Debts
If you don’t pay your debts, creditors can get a court order to garnish your wages, but what if your income comes from Social Security? The answer is that it depends on the kind of debt.
For most types of debt, including credit cards, medical bills, and personal loans, Social Security cannot be garnished to pay the debt. If you owe money to a creditor, the creditor can go to court and get an order to take money from your bank account. If your Social Security check is directly deposited in the bank, the bank is required to protect Social Security benefits from garnishment. When a creditor tries to freeze a debtor’s bank account, the bank is required to look at the debtor’s previous two months of transactions to determine if the debtor received any Social Security benefits by direct deposit. For example, if you receive $1,500 a month in Social Security, the bank is required to allow you to use up to $3,000 in your account.
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If you receive a Social Security check and deposit it in the bank yourself, the bank can freeze the entire amount in the account. You would be required to go to court and prove the money in the account came from Social Security.
For student loans and other non-tax debts, the government can take 15 percent of your Social Security check as long as the remaining balance doesn’t drop below $750. There is no statute of limitations on student loan debt, so it doesn’t matter how long ago the debt occurred.
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Can A Credit Card Issuer Garnish Your Social Security Benefits
Fortunately, the Social Security Administration does not allow your benefits to be garnished in order to settle credit card debt. In fact, your Social Security benefits cannot be garnished to satisfy any debts other than the types listed above, including credit card debt, unsecured and consumer debt like personal loans, and medical debt.
That said, there is one caveat that you need to be aware of on this topic. If your Social Security benefits are deposited directly into your bank account, the bank is required by law to automatically protect them from garnishment whenever a creditor attempts to take money from your account. If, however, you receive a Social Security check and deposit it in the bank yourself, the bank can freeze your account when the creditor tries to take money from it. In that case, you would have to go to court to prove that the money in your account is from your Social Security benefits.
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What Is Wage Garnishment And How Does It Work
Heres how garnishing works. A commercial creditor to whom you are in debt hauls you into court and wins a judgment against you. Then the creditor asks the judge for an order to garnish your wages, bank account, and any other assets you may have to satisfy that debt. The judge approves the garnishment to square the debt. Are all your assets vulnerable, including Social Security and retirement benefits such as a 401 or an individual retirement account ?
When The Creditor Is A Commercial Entity
When it comes to federal benefit payments, the answer is no. Were talking Social Security, Veterans Affairs benefits, railroad retirement benefits, and Office of Personnel Management retirement benefitsespecially if said creditor has issued you a credit card or an auto loan and your payment is late. Creditors holding medical bills, along with personal and payday loans, are also prohibited from garnishing these benefits. Thats according to Section 207 of the Social Security Act. Its the law.
In regard to 401s and IRAs, the former are generally safe from garnishment by commercial creditors as long as the money stays in the account, thanks to the Employment Retirement Income Security Act of 1974 , while the first million dollars in your IRA are protected under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 .
If youre not ordered to pay back taxes or child support, then the bank has to review the history of your account 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 that two monthsthe so-calledlook-back periodthe bank must protect the funds up to the total of the direct deposits. Youre free to spend it on anything.
However, if youre still working, your creditor can garnish your wages and, depending on the state where you live, other allowable assets you may have, such as a house or car.
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If youre income is being garnished you need to take action fast, but understandably you dont want to have to pay to get this type of help and information. This is why we offer a 100% free consultation.Our honest, licensed tax professionals will evaluate your situation and provide you with the answers you need. Chat with us live right now or call us if you prefer. We are NOT sales people, were true tax professionals.
Garnishment Of Social Security Benefits
Summary: Social security benefits are protected, but it is important to ensure the benefits are deposited into their own account. Supplemental Security Income benefits are usually exempt from any type of garnishment, but Disability and Retirement benefits may be garnished in some circumstances.
Social security benefits enjoy special protection under federal law. Social Security Disability and Retirement benefits may be garnished in limited circumstances. Supplemental Security Income 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 under under both bankruptcy and non-bankruptcy law if the funds are segregated.
These benefits can usually not be garnished. There are some exceptions to this which involve garnishment for child support, alimony, and federal debt, such as taxes or student loans. Supplemental Security Income benefits are usually exempt from any type of garnishment.
Many bankruptcy courts have held that social security funds are exempt 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.
Under federal law, filing bankruptcy will stop garnishments of social security.
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Can Commercial Creditors Garnish My Social Security
A commercial creditor is not allowed to garnish federal benefit payments, including Social Security, Veterans Affairs benefits, railroad retirement benefits and the Office of Personnel Management benefits.
Debts from medical bills, personal loans and payday loans also cannot lead to your Social Security benefits being garnished.
Types Of Social Security Income
The first type is Supplemental Social Security Income which is paid to disabled persons and adults over the age of 65. You qualify if your income is low enough to meet requirements and your situation meets other eligibility criteria.
The second type is Social Security Disability Insurance, also known as SSDI. These benefits are paid to adults who suffer from a disability and are unable or are restricted in their ability to work. The Social Security Administration has a long list of conditions that qualify as disabilities.
These types of federal benefits can help many Americans who struggle to earn enough income. Whatâs even better is that, in most situations, Social Security benefits like SSI and SSDI are protected from creditors. Youâre protected even if a creditor has a garnishment order, which is a court order to seize your wages.
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Wage Garnishments: What Income Can Be Garnisheed
Home » Blog » Wage Garnishments: What Income Can be Garnisheed?
Reading time: 37 minutes
2017-11-18
It is not uncommon for someone to call us worried because a creditor may be threatening a wage garnishment. When facing a garnishment they have three common questions:
Todays podcast is all about what types of income are subject to seizure through a garnishment order and how much can be garnisheed.
If you are under a garnishment order, you may also want to read or watch our podcast on steps to take if you have a wage garnishment.
How To Avoid Having Your Benefits Garnished
The best way to avoid having a portion of your Social Security income garnished is to stay current on your tax and student loan payments, and keep up with child support and alimony as required. But if you find that you’re unable to manage those payments, your best bet is to proactively reach out to the appropriate agency and work out a payment plan. For example, the IRS allows you to pay outstanding tax debt over time, so if you sign up for one of its installment plans and make your payments accordingly, you won’t have to worry about losing Social Security income.
Another thing to keep in mind is that the government will typically reach out with a warning before it goes so far as to garnish your benefits. You’ll generally have 30 days to then work out an arrangement, so as long as you respond to that warning and don’t ignore it, you can avoid losing a portion of your Social Security income.
When you’re heavily reliant on Social Security, you can’t afford to risk having even some of your benefits garnished. So don’t put yourself in that position. Understand what debts allow for garnishments, and reach out to the agencies involved before subjecting yourself to a loss in income. Many of us make mistakes and fall behind on our financial obligations, and if you take steps to get ahead of the problem, you can avoid repercussions that could damage your finances irreparably.
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How Much Can The Irs Garnish Of Social Security Benefits
Under the automated Federal Payment Levy Program, the IRS can garnish up to 15 percent of Social Security benefits. For example, if your benefit is $1,000, the IRS can take up to $150. Through a manual levy, the government does not take a set percentage. Rather, it allots you a minimum amount of living expenses and garnishes everything over that amount.
The IRS updates the guidelines every year. As of 2018, if you are single with one exemption, you can keep $887.50 per month. If you are married filing jointly with two exemptions, you can keep $1,775 monthly. The limits increase if you have more exemptions. The IRS can garnish everything over those amounts.
Can Your Retirement Benefits Get Garnished For Debts
If you find yourself in a financial bind during retirement, you might wonder if your creditors can go after your Social Security check, pension, or 401 account. You worked hard for decades to earn the right to your retirement income, and now, because of massive bills from a medical crisis or another economic downturn, you are afraid you might lose all or a significant portion of these assets. Can your retirement benefits get garnished for debts?
The short answer is, it depends. One of the main factors is the type of debt or financial obligation. Your retirement income, like your monthly Social Security check, cannot get garnished for some debts. However, you can lose some of your benefits for other types of debts. The kind of retirement asset also matters, when it comes to garnishment. For example, the law treats Social Security benefits different than retirement savings, like a 401.
Social Security Benefits and Garnishments
If you owe back taxes, the government can take up to 15 percent of your Social Security check, even if this levy leaves you without enough money to pay your living expenses. The government can also take up to 15 percent of your Social Security check for delinquent student loans, but only to the point at which you still get at least $750 a month in Social Security benefits.
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Who Runs The Treasury Department
The Treasury Department is headed by the secretary of the Treasury who is nominated by the president and confirmed by the Senate. is the Treasury Secretary in the BidenâHarris administration. Yellen was previously the chair of the Federal Reserve from 2014â2018. She is the first woman to hold either position.
Yellen’s top deputy at the Treasury Department is Adewale “Wally” Adeyemo if he is confirmed by the Senate. He is a veteran of the Obama administration and an expert on macro-economic policy and consumer protection with national security experience.
The Bank Must Review Each Account Separately
The bank must review each of your bank accounts separately. That means that if you have money in an account that Social Security funds are not directly deposited into, the bank cannot protect these funds even if you transferred some of your direct deposit Social Security funds into that account after they were received. The bank is not required or permitted to trace the direct deposited funds to other accounts.
But the rules can work in your favor as well. The bank must simply protect the balance in the account receiving direct deposits, up to the total of the direct deposits made during the look-back period. It does not matter whether the funds in the account at the time the garnishment order is received are part of the Social Security direct deposits or from a different source entirely.
Example
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Can Debt Collectors Take My Social Security Or Ssi Benefits
Usually, no. Your Social Security or Supplemental Security Income checks generally cannot be taken or garnished by creditors collecting debts. But, there are exceptions explained below.
What can be taken out of my Social Security check to pay debts?
- Up to 15% of your Social Security checks can be taken each year to pay federal taxes you owe.
- Any amount over $9,000 per year can be taken to collect federal debts other than taxes.
- Oregon law limits how much can be taken for spousal and child support. If you have a current Oregon support order, the monthly support amount can be taken. If you also owe back support, an additional 20% of the support amount will be taken. If you only owe back support, you can keep 160 times the federal minimum wage. The total amount to be taken for support can never be more than 50% of your Social Security, unless a court orders that more be taken.
- The deductions above cannot be made against your SSI checks.
- Deductions can be made from your Social Security and SSI checks to collect an overpayment of benefits.
