Home > Retirement & Debt > Social Security > Can Social Security Be Garnished for Credit Card Debt?
Being overly indebted on credit cards is never fun, but when you’re on a fixed income and fear that your Social Security benefits could be withheld to cover the debt, it becomes even more stressful.
Unpaid debt may result in court proceedings from creditors, and if you are employed, repayment may involve wage garnishment; however, if
you’re worried that your Social Security can be garnished for your credit card debt, you can rest easy.
You should be aware, though, that certain federal and state debts may be paid with a garnishment of Social Security, including Social Security Disability.
In addition to being exempt from commercial garnishment, military pay and veteran benefits may be garnished for court-ordered child and spousal support.
Supplemental Security Income (SSI) is the only federal benefit that is protected from any type of wage garnishment.
It’s critical to comprehend the workings of garnishment if you are a fixed-income person who depends on Social Security or another federal benefit but have a lot of credit card debt. It’s also important to know how to protect your income, strengthen your finances and eliminate debt.
It can be difficult to navigate the world of debt, particularly when it comes to knowing how your benefits are safeguarded. One frequent worry is if creditors can use your Social Security benefits to pay off unpaid debts.
The good news is that most of the time, credit card debt prevents Social Security benefits from being garnished. This means that your Social Security checks will not be affected even if you’re having financial difficulties and fall behind on your credit card payments.
Here’s a breakdown of the key points to remember:
- Federal law shields Social Security benefits from garnishment by private creditors. This includes credit card companies, debt collectors, and other commercial entities.
- The only exception to this rule is if you owe a debt to the federal government. This includes unpaid taxes, student loans in default, and certain court-ordered payments like child support or alimony.
- Even if you owe a debt to the federal government, there are still protections in place. For example, the government cannot garnish more than 15% of your monthly Social Security benefit.
It can be difficult to comprehend the subtleties of garnishment laws, so let’s go more into the details:
- The Consumer Credit Protection Act (CCPA): This federal law is your shield against garnishment for private debts. It explicitly prohibits creditors from seizing your Social Security benefits to satisfy credit card debt or other commercial obligations.
- Direct Deposit Protection: As long as you receive your Social Security benefits through direct deposit, your bank account enjoys an extra layer of protection. The bank is obligated to safeguard two months’ worth of your benefits from garnishment, even if you owe a debt to the federal government.
- Exceptions to the Rule: While your Social Security benefits are generally safe, there are a few exceptions to be aware of. These include:
- Unpaid Federal Taxes: If you owe back taxes to the IRS, they can garnish a portion of your Social Security benefits. However, they are legally bound to leave you with at least $750 per month.
- Defaulted Student Loans: If you have federal student loans in default, the Department of Education can also garnish your Social Security benefits. However, this practice is currently on hold until at least December 2023.
- Court-Ordered Payments: In some cases, a court order may allow for the garnishment of your Social Security benefits for child support, alimony, or restitution payments.
Beyond Social Security:
It’s important to remember that while Social Security benefits are generally protected, other forms of income may be vulnerable to garnishment This includes wages, salaries, and even bank account funds exceeding the two-month protection limit.
If you’re facing debt collection issues and are unsure about your rights, seeking professional guidance is crucial. A reputable credit counselor or attorney can help you navigate the complexities of garnishment laws and ensure your financial well-being.
Remember, knowledge is power. Gaining knowledge about garnishment and your rights will help you take charge of your finances and confidently deal with debt challenges.
Are Social Security Benefits Protected?
Federal income retirement benefits are protected from commercial garnishment through the federal Consumer Credit Protection Act. This means that credit card companies, medical bill collectors, and other commercial creditors cannot garnish Social Security or other federal benefits. Benefits are issued on prepaid cards or directly deposited into bank or credit union accounts (the Social Security Administration ceased mailing paper checks in 2013). Under the CCPA, federal retirement income deposited into bank, credit union, and prepaid card accounts is shielded from commercial garnishment. This includes income from:
- Social Security. This retirement benefit, known as FICA on your pay stub, is given to anyone who made contributions to the Social Security system while they were employed.
- Supplemental Security. As long as they have limited assets or income, people with disabilities who do not have FICA withheld from their pay are eligible for SSI benefits.
- Social Security Disability Income. For those who have paid FICA taxes and have a disability that prevents them from working, SSDI is a benefit.
- Veterans’ benefits.
- Military retirement pay.
- Federal Employee Retirement System income, including federal railroad worker benefits.
- Civil Service Retirement System income.
Other Tactics Used by Creditors
The Fair Debt Collection Practices Act is broken if a credit card company, debt collector, or other business threatens to withhold money from your Social Security. You should report the company to the Consumer Financial Protection Bureau and the Federal Trade Commission. Consumer reports about FDCPA violations help strengthen laws and put agencies that violate the law out of business.
Even if Social Security is your main source of income, credit card companies may use other means to collect payment if they are unable to garnish your benefits.
Some ways creditors seek payment are:
- Collection agencies: The creditor may sell your debt to a collection agency if you are 180 days or more behind on your payments. These companies will constantly call you and employ various tactics to force you to pay them because their only goal is to make money. The FDCPA shields you from harassment, but you are still responsible for payment if you owe money.
- Lien placement: If you are not paying a debt, a court judgment against you may result in the placement of a lien on your house or other property. The majority of states prohibit the sale of property until the lien is satisfied.
- Money or property seized by a court order: A creditor may obtain a court order to take money out of your bank account that isn’t Social Security-related. If you receive Social Security benefits through direct deposit, the bank must safeguard the first two months’ worth of payments in your account; however, any additional amounts may be pursued by the creditor. A creditor may seize your home or any other property that was used as security in the event of a mortgage or other secured debt.
- Refunds: Your tax return may be seized by the federal and state governments in order to pay back delinquent taxes or other outstanding debts. First priority is unpaid federal taxes, then other federal debt. The repayment of state debt (such as taxes or unemployment benefits) is of the lowest priority. Depending on the state in which you reside, once the refund is deposited into a bank account, private creditors may also pursue it. It’s just money in your bank account now; it’s not your tax refund.
Can Debt Collectors Garnish Social Security?
FAQ
Can a credit card company sue you if you are on Social Security?
How do I protect my Social Security from creditors?
Why seniors should not worry about old debts?
Can Social Security be garnished for credit card debt?
For most types of debt, including credit cards, medical bills, and personal loans, Social Security can’t be garnished to pay the debt. However, if you owe money to a creditor, the creditor can go to court and get an order to take money from your bank account.
Can creditors garnish social security benefits?
There are some cases in which creditors can garnish Social Security benefits, such as collecting federal income tax or payments for federal student loans. If you are dealing with debt collectors, consider ways you can get on top of your finances, so you can pay off your debt.
Can Social Security be garnished if you have student loan debt?
Similar to federal income taxes, the government can withhold Social Security benefits if you still have federal student loan debt remaining as you approach retirement. Once again, this can take place because the federal government is the creditor. As much as 15 percent of your benefits may be garnished.
Can a social security check be garnished if you owe money?
Social Security income is safe from most garnishments due to debt — but it isn’t safe from the federal government. Your Social Security check can be garnished if you owe money for back taxes, federal mortgages or student loans, and alimony or child support.