YOU ASK:

Can Social Security disability payments be garnished by creditors?

WE ANSWER:

No, private creditors (such as credit card companies or banks) cannot seize your Social Security disability checks as payment for one's debts.

Even if creditors have a legal right (i.e. has a judgment against your assets), one's disability benefits are exempted from the ruling. Social Security (as covered by the Social Security Act, Section 207) protects these benefits from garnishment, as well as assignment or levy. The only exceptions are for cases such as:

  • Alimony or child support that are past or currently due.
  • The Internal Revenue Service has the legal power to garnish your disability benefits (as well as your retirement benefits) if you aren't up to date with your tax payments.
  • The Internal Revenue Service allows you to give up a portion of your benefits in order to pay what you owe the government in taxes for the current year. According to the Tax Payer Relief Act of 1997, the IRS can withhold and collect up to 15% of the monthly disability payments until such a time as the tax debt is fully paid.
  • Other federal agencies can withhold the disability benefits in order to pay other non-tax debts that the beneficiary owes, such as unpaid parking tickets. This is based on the Debt Collection Act of 1996.
  • The benefits can be garnished if you have outstanding debts on federal small business or student loans, disaster loans provided by the government, as well as Veterans Administration mortgage.

Aside from these exemptions (which are mainly provided for federal bureaus), private creditors may not take your Social Security disability payments away from you.

In essence, private creditors can't take your checks since your disability benefits are need-based benefits and thus is disallowed from garnishment. The bad news, however, is that once you deposit the money into an account, it becomes an asset and creditors are allowed to garnish your accounts, just like any other asset you have. What you can do is to ensure that the disability payments are identifiable as disability benefits as paid for by Social Security. You can seek the help of a lawyer to protect your benefits from garnishment.

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