What To Do If You Are Dealing With Creditors
If youre in a situation where you have more financial commitments than you have money to pay them, it can be tempting to ignore the problem. After all, you cant afford the debt. Putting the issue out of mind may feel like a temporary solution.
But ignoring your debt is usually a mistake. Defaulted debts might snowball into a bigger issue, even if your Social Security benefits arent at risk. Instead of pretending that your debt problem doesnt exist, here are some better alternatives to consider.
What Is Wage Garnishment And How Does It Work
Heres how garnishing works. A commercial creditor to whom you are in debt hauls you into court and wins a judgment against you. Then the creditor asks the judge for an order to garnish your wages, bank account, and any other assets you may have to satisfy that debt. The judge approves the garnishment to square the debt. Are all your assets vulnerable, including Social Security and retirement benefits such as a 401 or an individual retirement account ?
Who Can Garnish Social Security
Even if youâre judgment proof from collection agencies and creditors, the federal government or state governments may still be able to pursue collection actions against you if you owe them money. The state government can garnish your benefits if you owe back taxes or court-ordered child support or alimony. The federal government can garnish your benefits if you owe federal income tax or youâve defaulted on your student loans. The government doesnât have to get a court order to garnish your Social Security income.
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This Content Is For Informational Purposes Only
Trantolo & Trantolo is not currently accepting cases for Social Security Disability. Please check in the future for any updates.
After discussing this issue with many of my clients over the past few months, I feel it is important to let anyone currently receiving or expecting to receive Social Security Disability Insurance Benefits know a secret that most debt collectors and creditors do not want you to be informed about. Namely, that your monthly SSDI award payments and your lump sum retro benefits are generally immune from garnishment by most creditors and debt collection organizations. In fact, federal law clearly provides that it is illegal for these funds, as well as several other sources of federally awarded funds, to be touched.
As Sir Francis Bacon once wrote knowledge is power. By informing yourself about this protection, you will understand why threats from your creditors of garnishing money in your bank account, getting a legal judgment against you to pay a debt, or otherwise seeking methods to take away your social security disability funds are not only false but also illegal.
However, there are three key issues to also be aware of to assure your SSDI funds are protected:
I hope this information is helpful to all of you current and future SSDI award recipients.
Can Social Security Benefits Be Garnished For Debt
Your social security benefits may be garnished for debt, depending on what kind of debt it is.
Social Security promises to provide income to older Americans, but what happens to that income when you have debt? Unfortunately, the answer depends on the kind of debt you owe. Below is an explanation of when debt can lead to social security garnishment and when your payments will be kept safe.
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Can Debt Collectors Take My Social Security Or Ssi Benefits
Usually, no. Your Social Security or Supplemental Security Income checks generally cannot be taken or garnished by creditors collecting debts. But, there are exceptions explained below.
What can be taken out of my Social Security check to pay debts?
- Up to 15% of your Social Security checks can be taken each year to pay federal taxes you owe.
- Any amount over $9,000 per year can be taken to collect federal debts other than taxes.
- Oregon law limits how much can be taken for spousal and child support. If you have a current Oregon support order, the monthly support amount can be taken. If you also owe back support, an additional 20% of the support amount will be taken. If you only owe back support, you can keep 160 times the federal minimum wage. The total amount to be taken for support can never be more than 50% of your Social Security, unless a court orders that more be taken.
- The deductions above cannot be made against your SSI checks.
- Deductions can be made from your Social Security and SSI checks to collect an overpayment of benefits.
Can My Bank Take My Social Security Or Ssi Checks After I Have Deposited Them In My Account
Yes. A court case allows banks in Oregon to take money out of your account to pay back any money you owe the bank if you have signed an agreement with the bank which gives the bank this right. The bank has this “setoff” right even if the only money in your account is from Social Security or SSI checks. For example, when you applied to get a credit card or a loan from the bank, you likely signed an agreement that if you fail to make payments, the bank can pay itself back by taking money out of your account.
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How Can I Stop My Bank Account From Being Garnished
If you want to avoid having a creditor levy your bank accounts, you need to pay your debts. If you have a debt that you don’t have enough money to pay, set up a payment plan to give yourself more time to pay. Most state and federal taxing authorities will work with you on this, as will many creditors.
Is There Anything I Can Do If I Owe The Debt But Cannot Pay It
Yes, you should find out if your income and assets are protected from the creditor. If you are judgment proof, you should send the creditors attorney proof of that as soon as possible. As an example, a benefit statement from the Social Security Administration or 2 recent bank statements that show the direct deposit of Social Security benefits would prove that the money in your account is from Social Security. If you are not judgment proof, you should try and work out a payment plan with the creditor.
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How Do You Know If Social Security Is Investigating You
THE SSA INVESTIGATION USUALLY STARTS WITH THE INTERNETSSA opens their investigation by looking for you on the internet. They will look up your name, phone number, and address. They usually already have this information, but they are checking it to make sure you are living at the address that you say you are living at.
How To Protect Monthly Payments And Lump Sum Grants
So you have received, or you are about to receive, an award for Social Security. Perhaps you are also receiving a lump sum award for past payments. Many Social Security recipients have old bills they are worried about. Some recipients are tempted to use their lump sum benefit to pay old debts, leaving them penniless. This informational flyer will go over what the law says about your award and explain how you can protect your future benefits and any lump sum award for your needs.
Persons receiving Social Security benefits should understand this important fact: Social Security benefits, including lump sum disability awards, are protected from creditors. They cannot be garnished or taken from you.
Here are some basic questions and answers regarding your lump sum award and future benefits:
â¢Do I have to use my award monies to pay old debt I owe?
The short answer is no. Even though your Social Security benefit is paid in a lump sum, it is still protected by law.
â¢Can collectors garnish my bank account into which my monthly Social Security is deposited?
First a collector must have a judgment before they can attempt to take money from a personâs bank account. That means the collector filed a lawsuit and served you a summons and complaint.
â¢How can I protect my lump sum Social Security award?
â¢Can anyone take my Social Security?
â¢What about student loans and past due taxes?
â¢Do I need to file bankruptcy?
â¢What if I have more questions?
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Your Debts Dont Disappear If Youre Judgment Proof
Being judgment proof doesnât mean that you donât have to manage your debts. Creditors will still report overdue balances and collection activity on your credit history. This will hurt your credit score. Being judgment proof means itâs not worth it for creditors and debt collectors to sue you for nonpayment because thereâs nothing to collect. But this probably wonât stop debt collectors from using other debt collection methods, including nagging phone calls and letters, even if they canât back up these efforts with a lawsuit.
How Can I Protect My Social Security Benefits
If youre in debt and youre worried about having your retirement income garnished, there are things you can do to protect your benefits. The first step would be to reach out to the organization collecting the debt – either the IRS or the lender – to try and work out a payment plan. In most cases, the collector will allow you to pay off the debt over time rather than garnish your wages.
If you have a significant amount of debt and you cannot afford all your payments, it may be best to hire an attorney or debt settlement firm to help you. These firms can often negotiate your debts and reach a settlement with your creditors. In some instances, they may even be able to resolve a portion of the debt entirely.
It also may be worth refinancing your debt. There are options to both refinance student loans and mortgages to make the debt you currently possess more manageable to pay off.
As a last resort, you could also consider filing for bankruptcy, but keep in mind that it is not a perfect solution. Many of the debts that can cause your Social Security wage to be garnished – including unpaid taxes and student loans – are also not dischargeable by bankruptcy,
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Can Debt Collectors See Your Bank Account Balance
While a creditor cannot easily look up your bank account balance at will, the creditor can serve the bank with a writ of garnishment without much expense. The bank in response typically must freeze the account and file a response stating the exact balance in any bank account held for the judgment debtor.
If You Have Social Security Money Deposited Into A Bank Account It Might Be Protected From Judgment Creditors
Judgment creditors can usually levy funds in your bank account to collect on their judgments. But if those funds came from Social Security, the judgment creditor is limited in what it can do. The money might be protectedespecially if you use the direct deposit option for your Social Security benefits. Thanks to federal regulations, two months of Social Security funds that are directly deposited into your account usually get automatic special protection from garnishment by judgment creditors.
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Can Debt Collectors Take My Social Security
Asked by: Eric West
Generally no, debt collectors can’t take your Social Security or VA benefits directly out of your bank account or prepaid card. After a debt collector sues you for the debt and wins a judgment, it can get a court order for your bank or credit union to turn over money from your account or prepaid card.
How Much Of My Benefits Will Be Deducted
The first $750 of your monthly benefits arent deducted in non-tax debt, no matter how much your monthly payments are. The federal government is not allowed to deduct in excess of 15% of your monthly payments.
The government can however claim 15% of your monthly benefits to repay federal tax debts. Based on your state laws and situation, they may deduct 50-65% for child support and alimony.
However, supplemental security income is protected from garnishment. This is a government income program to assist Americans in meeting their daily necessities.
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Social Security Funds Deposited In The Look
If the account history shows that Social Security or other protected government benefit funds were electronically deposited directly into your account within the look-back period, the bank must protect the funds in that account up to the total of the direct deposits. If the balance in the account is greater than the total of the direct deposits, only the excess can be frozen in response to the garnishment order. An amount equal to the direct deposits during the look-back period must remain accessible to you.
If the balance is less than the total of the direct deposits, the account can’t be frozen at all.
Protections For Direct Deposit Of Two Months Of Social Security Benefits
Under federal regulations, if a bank receives a garnishment order from a judgment creditor, it can’t freeze money that came from Social Security benefits if the government deposited the benefits directly into your account within two months prior to the garnishment order. This shifts the burden to your bank to ensure that you have access to the Social Security benefits you received in the previous two months.
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When Your Social Security Funds Arent Safe
These rules protect most of your Social Security income, but not all of it. If you have anything more than two months worth of benefits in your account, then that money could be seized.
Example: You receive $500 a month in benefits, but you have $2,000 in your account. A creditor can garnish $1,000 of your account in order to pay back your debts.
There is another caveat when it comes to Social Security benefits garnishment. It must be the only money that you deposit into that specific account. If you deposit any other funds into the account, banks arent legally responsible to know which funds can be garnished. The same rule applies if your Social Security check isnt automatically deposited or put on a prepaid card. If you receive a paper check for Social Security and deposit it into your account, then all that money is susceptible to garnishment.
Michigan Social Security Benefits: Protected From Garnishment And Bankruptcy
For years, debt collectors have hounded individuals for payments on old debts, and in many cases, utilized a legal process called garnishment to seize money from an individuals bank account. Once a debt collector has a court order to garnish an individuals bank account, the collector simply asks the individuals bank to freeze the account and send the amount necessary to satisfy the old debt to the collector, rather than the account holder.
In some cases, older individuals who have been the target of collection or garnishment actions are receiving Social Security or disability benefits. Federal law protects these benefits from garnishment. But often Social Security recipients did not know about the law or did not know how to assert their rights against debt collectors attempts to garnish bank accounts containing Social Security benefits. If you receive social security benefits, including DIB or SSI, and are being pursued by creditors, a Michigan social security benefits attorney can explain the protections available to you.
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Federal Steps To Protect Social Security Benefits From Garnishment
To protect federal benefits from being attacked by creditors, the Treasury Department recently issued a new regulation that requires banks to complete due diligence before handing over money to debt collectors. Bank officials must investigate whether Social Security benefits have been deposited in the individuals account, and must protect two months of those deposits from garnishment by debt collectors.
According to National Consumer Law Center estimates, up to one million Americans had federal benefits garnished last year.
Delinquent Child Support And Spousal Support
The Department of Treasury can also opt to withhold Social Security benefits in order to enforce an unmet legal obligation to pay child support, alimony or restitution. In such cases, the federal government may garnish your current and continuing monthly benefits.
If you owe child support, the government can take anywhere from 50% to 65% of your Social Security benefits, says Tayne.
Similar to unpaid federal tax debts, individuals are not given the opportunity to appeal to Social Security for implementing garnishment orders. If you disagree with any garnishment action taken by the government, your best course of action is to contact an attorney.
Even under the exceptions above, SSI is off-limits for garnishment or a bank levy unless you were overpaid and the Social Security Administration is correcting an error.
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Can Debt Collectors Other Than My Bank Take My Social Security Or Ssi Checks After I Have Deposited Them In My Bank Account
If you owe unpaid bills for consumer debts, your creditors may sue you in court and try to get a judgment against you for the amount you owe. If they get a judgment against you, they can then try to collect that judgment by garnishing your bank account. A garnishment order issued by a court after a judgment has been entered against you directs the bank to take money from your bank account, and makes the money unavailable to you.