If you don’t pay your debts, creditors can generally obtain a court order to garnish your wages. But what if your income comes from Social Security? In that case, the answer is a bit more complicated.
For most types of debts (including credit cards, medical bills, and personal loans), Social Security benefits cannot legally be garnished to pay them off. But how this actually works in practice can be tricky.
Suppose you receive $1,500 a month in Social Security, and have it directly deposited in your bank account. If a creditor tries to freeze your account, the bank must allow you access to any Social Security funds deposited within the last two months. So the bank would have to allow you access to $3,000 in your account.
On the other hand, if Social Security mails you a check and you deposit it yourself, the bank doesn’t automatically have to exempt the money from a freeze. In order to stop a garnishment, you would generally have to go to court and prove that some of the money in the account came from Social Security.
You should also note that there are other types of debts for which a creditor can garnish your Social Security payments. These include federal taxes, federal student loans, and child support and alimony.
In general, if you owe federal taxes, the government can garnish 15 percent of your Social Security checks to pay your debt.
For student loans, the government can also take 15 percent of your Social Security checks, although it can’t cause your account balance to fall below $750.
You might think that not many seniors are paying off student loans, but surprisingly, student loan debt is a growing crisis among elderly Americans. There’s no statute of limitations on student loans, so it doesn’t matter how long ago the debt occurred. In addition, many seniors aren’t paying off their own loans; they’re paying off loans that they co-signed for their children and grandchildren.
People who are 65 or older in the U.S. now owe some $18.2 billion on student loans, and 27 percent of these loans are in default. Among people aged 75 or older, the default rate is more than 50 percent.
As for child support and alimony, the rules vary from state to state. Under federal law, the maximum amount that can be garnished is 50 percent of your Social Security benefit if you’re supporting another spouse or child, 60 percent if you’re not supporting another spouse or child, or 65 percent if the support is more than 12 weeks in arrears. However, some states place additional restrictions on the amount that can be garnished.
These rules don’t apply to Supplemental Security Income, which is protected from garnishment even if the creditor can garnish regular Social Security. However, Social Security Disability Insurance can be garnished in the same way that regular Social Security can be garnished.