Can my Social Security or other federal benefits be garnished? (2024)

FAQs

Can my Social Security or other federal benefits be garnished? ›

Key Takeaways. The U.S. Treasury and the Social Security Administration can garnish your Social Security benefits for unpaid debts such as back taxes, child support, or a federal student loan that's in default. If you owe money to the IRS, a court order is not required to garnish your benefits.

Social Security benefits, SSI benefits, VA benefits, Federal Railroad retirement benefits, Federal Railroad unemployment and sickness benefits, Civil Service Retirement System benefits and Federal Employee Retirement System benefits are protected under Federal law from garnishment and the claims of judgment creditors.

50% if the Social Security recipient is already supporting a spouse or child other than the spouse or child who is due child support (55% if the support is 12 or more weeks late). 60% if the recipient is not supporting another spouse or child (65% if the support is 12 or more weeks late).

If Social Security benefits are your only source of income, private creditors and debt collectors have limited options to get their money. They can't garnish your Social Security income and they can't levy your bank account as long as it only contains Social Security income that was put there via direct deposit.

Generally, Social Security benefits are exempt from execution, levy, attachment, garnishment, or other legal process, or from the operation of any bankruptcy or insolvency law.

Federal income retirement benefits are protected from commercial garnishment through the federal Consumer Credit Protection Act. This means Social Security and other federal benefits can't be garnished by credit card companies, for medical bills, and other commercial creditors.

The key to making sure your federal benefits are legally protected from being frozen or garnished is to use direct deposit to put the money into your account or prepaid card. You can sign up anytime to have federal benefits direct deposited to your bank account or loaded onto a prepaid card.

Retirement accounts like 401ks and IRAs have special protection from creditors and debt collectors. Under federal law, 401ks and other ERISA-qualified plans cannot be garnished by creditors. IRAs also receive protection up to $1 million (adjusted for inflation) under federal bankruptcy law.

State Garnishment Laws

While all states allow wage garnishment for child support and unpaid state taxes, four states — North Carolina, Pennsylvania, South Carolina and Texas — don't allow wage garnishment for creditor debts.

Why should seniors not worry about old debts? ›

There are federal laws to protect VA benefits. There are state laws that protect IRA benefits and independent retirement accounts. So, seniors' income is protected by various laws, and if they don't pay their debt, or if they're unable to pay their debt, even if they're sued, it can't be garnished or taken from them.

If you are struggling with debt and debt collectors, Farmer & Morris Law, PLLC can help. As soon as you use the 11-word phrase “please cease and desist all calls and contact with me immediately” to stop the harassment, call us for a free consultation about what you can do to resolve your debt problems for good.

If you are on SSI (not SSDI) then you will lose your supplemental income for any months that you have $2,000 for the whole month (If it tops $2,000 during the month but then you use some and it doesn't stay over that, then you are not penalized).

Debt collectors cannot harass or abuse you. They cannot swear, threaten to illegally harm you or your property, threaten you with illegal actions, or falsely threaten you with actions they do not intend to take.

Option Two: File a Chapter 7 bankruptcy. The “upside” of proceeding in this fashion is that your Chapter 7 Trustee will not be able to reach your assets either, and the stress associated with harassing phone calls and other collection activities will stop immediately upon the filing of your bankruptcy petition.

There are four ways to open a bank account that no creditor can touch: (1) use an exempt bank account, (2) establish a bank account in a state that prohibits garnishments, (3) open an offshore bank account, or (4) maintain a wage or government benefits account.

The key to making sure your federal benefits are legally protected from being frozen or garnished is to use direct deposit to put the money into your account or prepaid card. You can sign up anytime to have federal benefits direct deposited to your bank account or loaded onto a prepaid card.

Banks must protect certain federal benefits from being frozen or garnished if they're directly deposited into your banking account. The bank must review your account and protect two months' worth of direct-deposited benefits before freezing or garnishing any money in the account.

Government agencies frequently garnish federal income tax refunds since they are the most common federal payments. The TOP is the only way your refund can be garnished; private creditors such as credit card companies don't have access to your tax refund.

Federal law protects some pensions, like Social Security, from being garnished for most debts, but private pensions and certain federal retirement benefits might be susceptible to garnishment.