Can Social Security Benefits Be Garnished to Pay Debts?

Did you see the story on 3TV news about the man who is being harassed by debt collectors over a 50 year old student loan? The man claims he paid off his student loans decades ago, but a debt collection company is saying that he still owes $1,938 in interest, fees, and costs.

It isn’t clear whether the man in the story is retired and living on a fixed income, but if he went to college in the 1960s, I’m betting that he is. If that’s the case, he had better hire an attorney to represent him! Student loan debts follow you for life, and if you don’t repay them, the government can take some of your wages, seize your tax refunds, or garnish your Social Security payments until your debt is paid off.

Yes, you read that right, Social Security and Social Security Disability Insurance (SSDI) payments can be garnished to pay off certain debts. In addition to federal student loans, Social Security and SSDI can be taken to pay for back taxes, child support, alimony, victim restitution, and other miscellaneous federal debts.

What about Other Debts?

While the government has taken steps to ensure that it can be repaid debts it is owed, it has limited the ability of other creditors to access your Social Security and SSDI funds.

If a creditor is able to prove to a court that you owe it a debt and that you are not paying it back, the creditor can ask your bank to turn over money from your account to satisfy the judgment. When this happens, your bank must look at your account history to see if you have received any direct deposits from Social Security. (FYI, it must also look for VA benefits.) If you have received benefits via direct deposit, it must protect 2 months worth of benefits from garnishment.

You will have full access to the 2 months worth of benefits, but all other money in the account will be frozen. You will be notified that this has happened, and will have a short period of time to decide what to do next. If you don’t do anything, the other money in your account can be transferred to your creditors. If you don’t think the debt is valid, or you can show that all of the money in the account should be protected from your creditors, you can take your case to a judge, who will then decide what happens next. Whether you will be able to keep your money, or whether it will be given to your creditors, depends largely on where the additional money in your account came from.

It is important to note that banks are only required to protect two months worth of direct deposits. If you are getting a paper check each month that you then deposit into your account, the law protecting that money from being frozen does not apply. Only funds that are directly deposited are eligible for protection.

If You Think Something Fishy Is Going On, Seek Help Immediately

The man in the news who was targeted by the student loan debt collectors did the right thing by reaching out to 3TV’s On Your Side investigators. If he has not spoken to one already, I hope that his next call is to an experienced attorney. When you are living on a fixed income, and particularly if that income is from Social Security, being targeted by creditors is something that should get professional help to deal with right away