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Are Social Security Benefits Safe from Creditors in Pennsylvania and Beyond?

Individuals facing debt may be concerned that creditors will access their Social Security benefits. If a collector sues a debtor to recover the debt and wins a judgment, they may be able to secure a court order that directs money to be seized. This is termed “garnishment.”

Certain debts that remain unpaid may be within the reach of creditors. And this is good news, since the Social Security Administration reported that over 80% of near-retirees had household debt. With a few exceptions, banks automatically protect Social Security benefits from garnishment if they are directly deposited into your bank account.

Two Months’ Worth of Benefits Protected if Directly Deposited

Credit card debt, personal loan debt, and debt resulting from medical bills cannot be garnished from Social Security.   Even when a creditor attempts to freeze a debtor’s account, the bank will examine the previous two months of transactions in order to assess whether the debtor received Social Security benefits by direct deposit. If someone received $1,500 in Social Security, the bank will allow them to use two months’ worth of funds in their account, or $3,000. If that person’s account has more than two months’ worth of benefits, the bank can freeze the amount over two months’ worth.

A bank will not freeze your money without providing notice. You would receive a notice of garnishment first, and then a judge would decide whether the money should be turned over to the collector. Factors that would be considered include state law and the source of your income. It is important to put the judge on notice that your money comes from Social Security benefits.

No Automatic Protection for Paper Checks or Federal Debts

In the event you do not directly deposit your Social Security checks but instead deposit them yourself, the bank may freeze the entire amount in the account. You would then need to go to court and prove that the money was received from Social Security and should not be garnished. For most people, this is not a problem, since the government began using direct deposit several years ago. Some elderly beneficiaries still receive paper checks because they were granted waivers and did not transition to electronic payment.

For certain debts, such as federal taxes, child support, federal student loans, and alimony, Social Security can be garnished. Individuals who owe federal taxes may face 15% of their Social Security check being used to pay for their debt, no matter the amount of money left.

Student loan debt and other non-tax debts do not have a statute of limitations. In other words, it does not matter how long ago the debt arose. The government can recover 15% of a Social Security check, provided the remaining balance does not drop below $750.

These rules regarding garnishment do not apply to Supplemental Security Income (SSI). Even if the creditor can garnish regular Social Security, SSI is protected. Social Security Disability Insurance can be garnished in the same manner that Social Security is garnished.

At Needle Law, we help individuals receiving Social Security benefits understand their rights and legal obligations. Our Pennsylvania Social Security Disability attorneys provide guidance and information surrounding your federal benefits. Contact our office for a free consultation by calling 570-344-1266.

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