Falling behind on bills can happen to anyone. Maybe he lost his job, or a health crisis ate up her savings. Whatever the reason, being the target of debt collectors is a scary prospect. At least Social Security checks are untouchable… or are they?
If someone is currently receiving Social Security benefits and debt collectors are looking for him, there’s good news. Only in certain circumstances can Social Security money be garnished, or taken for the repayment of debts. If collectors are after someone because of missed car payments or unpaid utility bills, at least part of his Social Security earnings is off-limits.
How Social Security Checks are Protected
First, it’s important to understand that debt collectors can’t access the funds from a Social Security check (or any other money in a person’s bank account) without a court order. If the collector gets that court order, it may contact the person’s bank to try to freeze his accounts.
There’s no need to contact the bank to ask for help protecting Social Security benefits from collectors. The U.S. Department of Treasury requires banks to automatically shield certain types of benefits from garnishment. Social Security payments are one of the protected benefit types.
There are limitations to this protection. First, it only applies to funds that are direct deposited into an account. In the past, beneficiaries who received paper checks could see their Social Security money garnished. Because the Social Security Administration phased out paper checks in 2013, this is no longer a concern. (Social Security checks paid via prepaid card are also protected from garnishment.)
A bigger issue is that banks are only required to protect two months’ worth of payments from garnishment. If a beneficiary receive $1,500 per month, his bank must shield $3,000 for his use, but theoretically any amount in the account that exceeds $3,000 could be garnished by a collector that gets a court order.
There’s one more limitation that affects whether someone’s Social Security money can be protected. It involves the type of debt that the person owes.
Who Can – and Can’t – Garnish Social Security Money
To recap, debt collectors can’t access a person’s bank account without a court order, and even then the person’s bank is required to shield two months of Social Security payments. But things are a little different when someone owes debts to the government, or owes child support.
Say someone goes into collection on a government debt such as federal student loans. The government may garnish at least some of her Social Security payments. However, the Debt Collection Improvement Act of 1996 authorized a process called Benefit Payment Offset (BPO). Basically, it allows the government to divert some of a person’s Social Security money to the agency that she owes.
Even with this policy in place, the government will not take all of a Social Security check. The act that created BPO also requires that it not be used to lower a beneficiary’s payments below $750. So anyone who owes federal debts and has her Social Security checks garnished is still entitled to receive $750 each month.
What to Do About Garnished Social Security Payments
Anyone who gets a court order to garnish funds is required to notify the person whose money is being garnished. It’s important to take action upon receiving this notification. For one thing, it’s possible that some of the other money in the bank account is also exempt from garnishment, and is being wrongfully taken.
The Consumer Financial Protection Bureau provides a form letter that individuals can send to debt collectors who try to garnish their income. But it may be necessary to contact an attorney who can help figure out the next steps. Settling these cases often requires going to court.
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