Can Creditors Garnish Your Social Security Benefits?

No, creditors usually can’t garnish your Social Security benefits to cover unpaid debts. If you're on a fixed income like Social Security, you may not have a lot of room for error in your overall household budget. If you have a judgment filed against you, you may worry what that might do to your financial picture. The good news is that in most cases, creditors can't garnish your Social Security benefits, even if you have a judgment filed against you.

What Is A Garnishment And How Can It Affect Your Social Security?

If you owe money to a private party or company, they can sue you in court for the owed debt. If a judge agrees that the debt is legitimate, the court may issue a judgment against you. With a judgment, your creditor can garnish your wages and/or bank account. In some cases (like if you owe money to the IRS), your bank account may be garnished even without a judgment. If you receive a judgment, you may be worried that your wages or bank account may be garnished. Thankfully, in most cases Social Security benefits cannot be garnished to cover unpaid debts.

Can Social Security Be Garnished By Creditors?

Social Security benefits are generally protected from creditors, as long as you are receiving them by prepaid card or direct deposit. There are several federal and state laws that protect Social Security benefits from garnishment, in most cases.

Federal Automatic Protection Rule

The Federal Automatic Protection Rule (issued by the U.S. Department of the Treasury, the Social Security Administration, the Department of Veterans Affairs, the Railroad Retirement Board and the Office of Personnel Management) determines whether Social Security benefits are protected from garnishment.

If you receive your benefits via direct deposit or on a prepaid card, they are generally protected from garnishment. Additionally, 2 months’ worth of funds are protected from garnishment by a bank or credit union. That means if you receive $1,000 in monthly benefits, your bank cannot garnish your account below $2,000 (2 months' worth of funds). Any amount above $2,000 could be subject to garnishment.

Benefits Protected Under The Federal Regulation

In addition to Social Security benefits, the following benefits are also generally protected from debt collectors. This includes:

• Social Security benefits
• Veterans’ benefits
• Supplemental Security Income (SSI)
• Federal Employees Retirement System benefits
• Civil Service Retirement System benefits
• Federal Railroad retirement benefits
• Federal Railroad unemployment and sickness benefits

State Protection Laws

Some federal benefits (including Social Security benefits) may also be protected from garnishment under state laws. For example, the New York Exempt Income Protection Act, or EIPA) also offers some protections against garnishments for people receiving federal benefits such as Social Security. Check with your state's governing body or your local senior aid center to determine how state laws might affect you.

What Debts Can Be Garnished From Social Security?

While the general rule is that Social Security benefits are free from garnishment, there are some exceptions to the rule. The different types of debts that creditors can cover with Social Security funds include:

• Federal income taxes: If you owe unpaid federal income taxes, the IRS can garnish your account, including federal benefits like Social Security. Generally, the IRS can garnish up to 15% of each Social Security payment to pay Federal tax debts.
• Child support: Debt collectors can garnish one’s Social Security to cover delinquent child support payments. So, if you owe child support, your Social Security benefits may be accessed to cover your past-due payments.
• Alimony: Similar to child support payments, debt collectors can garnish Social Security to cover unpaid alimony payments.
• Restitution: If you owe court-ordered restitution to a victim as part of a criminal case, you may also have your Social Security benefits garnished. Generally, up to 25% of your Social Security could be garnished if you're behind on restitution payments to a victim of a crime you've been convicted of.
• Federal student loans: Unpaid federal student loans are another exception to the rule preventing garnishment of Social Security benefits.

Remember too, that debt collectors may also be able to garnish your Social Security funds if the funds are deposited with paper checks instead of direct deposit or a prepaid card.

What Else Can Creditors Do To Collect Debt?

Besides garnishment, there are a few other actions that creditors can take to collect unpaid debts. Here are a few other options to be aware of:

• Selling your debt to a collection agency: The person or company that owns your debt may choose to sell it to a collection agency. Then the collection agency will take steps to try and collect on the debt.
• Putting a lien on your property: If you own property like a home or other real estate, your creditor may put a lien on it. This may prevent you from selling or refinancing the property later.
• Taking non-Social Security funds from your accounts: If you have additional funds in any of your bank accounts, creditors may garnish those funds. The federal rule only prevents garnishments below 2 months' worth of benefits.
• Using your tax refund to cover unpaid debts: In some cases, your federal or state tax refund may be garnished to collect on debts you owe.

What To Do If Your Social Security Is Garnished: 5 Steps

If your Social Security funds are garnished by debt collectors, here are a few steps to consider:

1. Contact The Debt Collection Agency

The first thing that you can do if your Social Security benefits are garnished is to contact the debt collection agency. Explain the situation and you may be able to come to an arrangement.

2. Seek Legal Help

In conjunction with contacting the debt collection agency, you may want to seek legal help. This could be directly with a lawyer or through a government or nonprofit aid agency.

3. Consider Credit Counseling

Credit counseling is another option to consider. Working with a qualified and reputable credit counselor can help you explore your options for working through your debts.

4. Develop A Debt Consolidation Plan

If you find that you have more debts than you can handle, you might also consider debt consolidation. A debt consolidation plan can take all of your debts and combine them into one. This may make it easier to make regular payments to pay down your debt, and you may qualify for a lower interest rate as well.

5. File For Bankruptcy

As a last resort, you may decide to file bankruptcy. While bankruptcy may eliminate some of your debts, it also comes with some fairly severe negative consequences. Make sure to consider all of the different options before you decide on this option.

Social Security Garnishment FAQs

How do I know if my Social Security income is being garnished?

The easiest way that you might notice that your Social Security income is being garnished is if you find that you have less money in your account than you expect. You may also notice an entry from the garnishment on your bank statement.

Can my Social Security be garnished if it’s my only source of income?

In most cases, Social Security benefits can't be garnished if you are receiving your benefits via direct deposit or prepaid card. However, there are certain cases where your Social Security benefits may be garnished, even if it's your only source of income.

Can my Social Security benefits be garnished for credit card debt?

Generally, Social Security benefits are protected from garnishment for credit card debt. This holds true if you get your Social Security on a prepaid card or via direct deposit. However, this typically only protects up to 2 months' worth of benefits — if you have more than that in your account, it may be garnished.

Can my Social Security payments be garnished for a civil lawsuit?

While there are some cases where Social Security payments can be garnished for restitution in a criminal case, generally your Social Security benefits cannot be garnished for a civil lawsuit. Again, the same caveats apply — you must receive your benefits by prepaid card or direct deposit and the protection only applies to 2 months' worth of benefits in your account.

The Bottom Line: Avoid Garnishment By Prioritizing Debt Payments 

The best way to handle garnishments is by avoiding them in the first place. Staying on top of your debt payments is one of the most important things that you can do to secure your financial future. Still, it's important to understand that if you are in a position where you have received a judgment against you, your Social Security benefits cannot typically be garnished. Using the Rocket Money℠ app can help you better manage your debts. Download the Rocket Money mobile app today.