Defaulting on a debt owed to a credit card company or other creditor usually leads to threatening letters and phone calls from debt collectors. If you depend on disability benefits to make ends meet, it’s natural for you to be concerned and ask: Can debt collectors garnish disability benefits? Generally, debt collectors cannot resort to garnishing disability benefits. However, there are exceptions.
This guide from Sackett Law explains the federal laws dealing with disability benefits and debt collection. It also explains how to fight against garnishment of disability payments that violate debt collection laws.
Garnishment And The Debt Collection Process
If you default on repaying a debt, the creditor may turn to a debt collector to recover what is owed. The debt collection process usually starts with phone calls and letters demanding payment, but garnishment cannot be used until after the creditor sues you in court.
A court must award a judgment to the creditor for the collection process to move beyond threatening letters and telephone calls. The judgment allows a creditor to request a court order for garnishment or seizure of wages and assets to pay the judgment.
Garnishment is a legal process allowing a creditor to take a portion of the income you receive, including wages and Social Security disability benefits. Section 207 of the Social Security Act regulates Social Security disability and debt collection. As a general rule, creditors, even those who have a judgment against someone who owes them money, cannot resort to garnishment of disability payments to recover what is owed.
Social Security Disability Insurance and retirement benefits may be garnished to repay any of the following financial obligations:
- Child support
- Alimony or spousal support
- Unpaid federal taxes
- Debts owed to government agencies
SSI and SSDI garnishment rules differ. SSI garnishment rules do not allow debt collectors to seize SSI disability because it is a need-based program. Benefits are intended to provide a person with money for food, shelter, and other life essentials.
Can Creditors Take Disability Benefits Deposited To A Bank Account?
The Social Security Administration pays monthly disability benefits for SSDI and SSI using direct deposit to a bank account that you designate or to a debit card. If a creditor attempts to garnish money directly deposited into your bank account, the bank must limit its compliance with the court order so that two months of benefits remain in the account.
For example, if you receive $1,000 a month in SSDI benefits directly deposited by the Social Security Administration to your bank account, the bank must protect up to $2,000 of the account balance from garnishment. Protection of two months of benefits only applies to funds received by direct deposit.
Disability Income Protection
The best way to avoid debt collectors is to avoid allowing financial obligations to become unmanageable to the point where you fall into arrears. There are nonprofit agencies offering credit counseling services for free or at low cost with fees based on your income.
Credit counseling services help you manage debt by creating a repayment plan based on your income. If necessary, the services work with creditors to avoid debt collection by creating a repayment plan acceptable to them while also being what you can afford and continue to pay everyday living expenses.
If a debt collector garnishes disability benefits protected by federal law, written notice to the debt collector that the funds are protected should be your first step to get the money released. However, you may need to take legal action by asking the court that authorized the garnishment to return the funds to your control.
It’s essential to keep records to prove the source of the funds you receive each month. You may need to prove that the source of the money a debt collector is trying to seize is disability benefits from SSDI or SSI.
It’s not only debt collectors who engage in garnishing disability benefits. If you receive an overpayment of benefits, the Social Security Administration must recover the money from you. The SSA accomplishes this by taking the overpayment from your monthly benefits.
Until 2024, the SSA could take all benefits you received from SSDI and 10% of SSI benefits each month until an overpayment was recovered. As of 2024, federal regulations limit the SSA recovery to 10% per month for SSDI and SSI.
Get Disability Benefits Advice From An Experienced Disability Lawyer
Sackett Law has been the go-to source relied upon by people throughout Northern California for legal advice and representation in all matters related to Social Security disability claims. Now, Sackett Law is available to people needing assistance with disability claims anywhere in the United States.
Whether you have questions about disability benefits and debt collection or require representation to appeal a claim denial, an outstanding disability lawyer is available to help. Contact Sackett Law today for a free consultation and case evaluation.
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