CAN CREDITORS GARNISH YOUR BENEFITS?

The government has special protection against garnishment for Social Security recipients. Can a creditor garnish your disability benefits? The short answer is No. But there are a few exceptions and some precautions should be taken.

What should you do to protect your Social Security income from creditors who may want to garnish it through legal action?

First, be sure not to mix Social Security funds with any other funds, including funds of a spouse or business partner. Only your Social Security money is protected. No other money put into your bank account is protected.

For example, Bettie's Social Security check of $1,710 is directly deposited to her bank account each month. Bettie receives a pension from her former employer, which she also deposits into the same bank account. A creditor seizes money for a debt and takes both Social Security money and pension money, which is not protected. It now becomes a confusing mess to sort out which money could be garnished and which could not. It would have helped Bettie if she deposited only her Social Security benefit into this account and used a different account for other money.

The same problem can occur when more than one person uses the same account. For example, Bettie's husband, Bernie, deposits his money into the same account because he is a joint owner of the account. Their money becomes mixed. Now, a creditor may seize some of Bettie's money by mistake. Many creditors do not know that they can't seize Social Security money. Some don't care. I have found that many banks and credit unions don't even know that Social Security money is exempt from seizure. So, it's very important to keep SSDI or SSI money separated from other money. Don't intermingle in the same account. That way, if you are erroneously garnished, it's much easier to correct.

Now, for some exceptions to the no garnishment rule. Certain debts are not exempt and can garnish or put liens on Social Security benefits. For example, past due child support may be collected this way. Certain debts to the federal government may be seized this way: federally guaranteed loans, student loans or income tax obligations can use seizure or garnishment to collect.

If your Social Security benefits do get garnished or seized, notify your financial institution at once, then also notify them in writing. Keep a copy of your letter. The institution is supposed to investigate and take appropriate action. Sometimes a bank or credit union may honor a lien or garnishment before realizing that it is in violation of federal regulations.