Thursday, June 16, 2022

Can Debt Collectors Garnish Social Security

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Can Debt Collectors Garnish Social Security

Can Debt Collectors Garnish Social Security?

When people borrow money, they usually plan on paying it back. Unfortunately, however, certain events, such as illness or job loss, can interfere with a persons ability to honor his or her financial commitments. Failing to pay a debt can result in several negative consequences, including lawsuits, credit damage, and even wage garnishment. In this article, we examine whether a debt collector can garnish a debtors Social Security benefits.

How Much Can The Sba Take From My Social Security

The SBA can take up to 15% of your Social Security benefits. So, if you receive $1,000 a month, you could lose $150. However, by statute, your benefit payments of up to $9,000 per yearâor $750 per monthâare exempt from offset. That is, the aggregate amount of your monthly benefit payments must exceed $750 to qualify for offset. Congress imposed the 15% limitation by regulation in response to the concerns some members of Congress expressed when enacting the Debt Collection Improvement Act, which authorizes the offset scheme. Congress worried that federal benefit recipients may depend on the Social Security benefit payments for a substantial part of their income. With these concerns in mind, the Department of Treasury imposed the 15% limit on the offset of Social Security benefit payments.

In other words, the amount of a Social Security payment eligible for offset is the lesser of: the amount of the debt an amount equal to 15% of the monthly covered benefit payment or, the amount, if any, by which the monthly covered benefit payment exceeds $750.

For example, if you receive a monthly Social Security payment of $850, the amount which canbe offset is the lesser of $127.50 or $100 . In this example, assuming the debt is at least $100, the amount which can be offset is $100 each month.

Understand The Rules That Protect Social Security Income Benefits From Garnishment

Getting behind in your credit card payments is troubling, especially with the knowledge that you can be sued by a credit card company to be repaid. If you do not show up to your court proceedings, the judge may order your wages or even your bank account to be garnished in order to pay back your credit card debt. This can leave you in even greater financial straits, as money you may need for other bills and debts is now being used to pay back that debt.

But can Social Security be garnished for credit card debt? This depends on your unique financial situation. There are a few rules creditors must follow before they garnish money from your bank account, according to the Consumer Financial Protection Bureau. One of these rules specifically protects consumers who receive Social Security benefits.

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Collectors Taking Money From Your Wages Bank Account Or Benefits

Can Your Social Security Check be Garnished?

Debt collectors can only take money from your paycheck, bank account, or benefitswhich is called garnishmentif they have already sued you and a court entered a judgment against you for the amount of money you owe. The law sets certain limits on how much debt collectors can garnish your wages and bank accounts. Certain federal benefits, such as social security benefits and veterans’ benefits, generally cannot be garnished. For more information about garnishment and what you can do if your bank account or benefits are garnished, see the FTC’s “Garnishing Federal Benefits”.

If you get a summons notifying you that a debt collector is suing you, don’t ignore it. If you do, the collector may be able to get a default judgment against you and garnish your wages and bank account. If you are sued by a debt collector, you may want to consult an attorney to discuss your options.

For more information about debt collection and your rights, visit the following:

  • FTC’s Dealing With Debt: Information about managing debt, credit repair, and different debt collection issues.
  • CFPB’s Debt Collection: Common questions about debt collection.
  • FTC’s Fake Debt Collectors: How to tell if a debt collector is legitimate or a fraudster.

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Federal Steps To Protect Social Security Benefits From Garnishment

To protect federal benefits from being attacked by creditors, the Treasury Department recently issued a new regulation that requires banks to complete due diligence before handing over money to debt collectors. Bank officials must investigate whether Social Security benefits have been deposited in the individuals account, and must protect two months of those deposits from garnishment by debt collectors.

According to National Consumer Law Center estimates, up to one million Americans had federal benefits garnished last year.

What Is Judgment Proof

There are two major phases of a lawsuit filed against you by a creditor. The first phase is the creditor getting a judgment against you. The next phase is the creditor proceeding to collect on the judgment.

If you have no assets or income, or your only income is Social Security benefits, then youâre judgment proof. This means almost all creditors have no way of collecting on the debt. Note that being judgment proof doesnât mean that a creditor wonât sue you, it just means they have no way of collecting the debt that is owed.

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Avoid Keeping Social Security Benefits Idle In Your Account For Too Long

The bank has a particular lookback period to consider before garnishing your benefits. Its usually two months or 60 days before the bank levy or notice for garnishment.

Its difficult protecting your benefits if you keep them in your bank account for longer than the lookback period.

So dont keep the benefits idle in your account for more than 60 days, especially if creditors are after you.

Are My Social Security Benefits Safe From Creditors

Protect the People You Care for from Debt Collectors – Garnishment of Social Security

When consumers secure lines of credit or take out loans, they are legally required to pay their creditors or debt collectors back per the terms of their lending agreements. When an individualâs financial situation leads to missed payments or default on an account, the debt collector or creditor that is owed money is generally allowed to sue the borrower and to obtain a judgment against that individual. These court judgments may result in:

  • Garnishments â A court order that a portion of an individualâs income or property may be sent directly to a creditor instead of going to the individual .

  • Bank Account Levies â A court ordered debt collection in which a bank is instructed to withdraw money from a debtorâs personal bank account without the debtorâs permission the funds are used to pay back creditors.

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What Is A Challenge To Garnishment How Do I File One

A Challenge to Garnishment, sometimes called a claim of exemption, is a legal form to be filed with the court to claim the property being garnished is exempt from collection. You will receive a Challenge to Garnishment form when your bank account is garnished. You must complete the form and file it with the court as soon as possible to try to keep your money. After you file a Challenge to Garnishment, there will be a hearing in court and a judge will decide if you will be able to keep the money in your account.

However, until the court decides if the money in your account is exempt, your account will be frozen and you can’t withdraw any money or write checks on your account, and checks you have already written will bounce.

Can Debt Collectors Other Than My Bank Take My Social Security Or Ssi Checks After I Have Deposited Them In My Bank Account

If you owe unpaid bills for consumer debts, your creditors may sue you in court and try to get a judgment against you for the amount you owe. If they get a judgment against you, they can then try to collect that judgment by garnishing your bank account. A garnishment order issued by a court after a judgment has been entered against you directs the bank to take money from your bank account, and makes the money unavailable to you.

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How Can You Maximize Your Benefits

Lastly, there are a few things you can do to maximize your Social Security payments. Theyre listed below for your benefit:

  • Delay claiming until age 70: After you reach full retirement age, if you delay claiming your benefits, payments will rise by about 8 percent per year until you reach age 70. Once you hit 70, there is no further benefit.
  • Claim spousal benefits: You can either claim benefits based on your own work record or you can claim 50 percent of your spouses benefit, whichever is higher.
  • Dont earn too much in retirement: In 2020, at full retirement age, you can earn up to $48,600 before penalties are taken out. If you earn above that, Social Security will deduct one dollar for every three dollars you earn.

What If The Social Security Garnishment Causes Me Financial Hardship

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Unfortunately, Congress and the Department of Treasury already accounted for a hardship with the offset limits discussed above. Even though the $100 garnishment in the example above may constitute a financial hardship for you, the government provided no mechanism to appeal the garnishment or have it reviewed based on financial hardship or reduced.

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If The Only Money Deposited To My Bank Account Is From Social Security Or Ssi Checks Can I Stop Creditors From Garnishing My Account

When any of your creditors gets a court judgment against you which you can’t afford to pay, you should tell them that your only income is from Social Security or SSI and you can’t afford to pay. Some creditors may then decide not to try to get a garnishment order against your bank account. You may also sign an affidavit and give it to your bank to let the bank know that your money comes from Social Security or SSI and shouldn’t be garnished. Your bank can give you an affidavit to fill out.

Put The Debt Behind You With Chapter 7 Bankruptcy

While bankruptcy is something most people want to avoid at all costs, I usually find they have not assessed the costs at all. While we talk about your credit card bills being affordable with credit counseling, or by settling for less above, chapter 7 bankruptcy is typically the ultimate in affordability.

Chapter 7 could cost you less than 2k from start to finish . You are able to discharge those credit card debts , and once discharged, you remove any and all risk of being sued, or any type of bank levy, garnishment, and property liens.

You have to qualify for chapter 7 bankruptcy using an income means test specific to your state. And just like there are state exemption laws that protect you from debt collectors, there are state exemptions for what you are allowed to keep in a chapter 7 bankruptcy. If your stuff is valued at more than the exemptions in your state, you may look to a chapter 13 bankruptcy where you repay some, or all of the debt, over probably 5 years. But when it comes to people having to consider chapter 13, I have often found those folks to be the best candidates for settling the debts for less instead.

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Exceptions To The Rule

Your Social Security benefits might be at risk if you owe any of the following:

  • Federal income tax.
  • Federal student loans.
  • Delinquent child support and/or spousal support.

If you receive your benefits via paper check, your Social Security income might be vulnerable as well.

Even under the exceptions above, Supplemental Security Income is off-limits for garnishment or a bank levy unless you were overpaid and the Social Security Administration is correcting an error.

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Can State Tax Collectors Garnish Social Security and Retirement?

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    What If Your Account Is Frozen Or Garnished

    If your bank account has been frozen or garnished, you should receive a notice of garnishment that explains the court procedures for claiming exemptions and getting funds released. You will then go to court where a judge will decide if your money is turned over to the debt collector after looking at your income source and any exemptions on the federal and state levels. It is important to make sure the court knows if your money comes from any federal benefits programs, so the right decision can be made.

    Two Months Of Protection

    First, the bank or credit union that holds your account must protect any benefits over the past two months. If there are more than two months worth of benefits in your account, the bank can freeze or garnish that extra money. For example, if you get $1,000 every month in SSDI, and a creditor garnishes your accounts, the bank must to allow you to use any money deposited within the last two months, up to $2,000. Anything more than that, it can freeze.

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    Can Debt Collectors Take My Social Security Or Ssi Benefits

    Usually, no. Your Social Security or Supplemental Security Income checks generally cannot be taken or garnished by creditors collecting debts. But, there are exceptions explained below.

    What can be taken out of my Social Security check to pay debts?

    • Up to 15% of your Social Security checks can be taken each year to pay federal taxes you owe.
    • Any amount over $9,000 per year can be taken to collect federal debts other than taxes.
    • Oregon law limits how much can be taken for spousal and child support. If you have a current Oregon support order, the monthly support amount can be taken. If you also owe back support, an additional 20% of the support amount will be taken. If you only owe back support, you can keep 160 times the federal minimum wage. The total amount to be taken for support can never be more than 50% of your Social Security, unless a court orders that more be taken.
    • The deductions above cannot be made against your SSI checks.
    • Deductions can be made from your Social Security and SSI checks to collect an overpayment of benefits.

    How Does The Rule Work

    Can Debt Collectors Garnish My Federal Benefits?

    If a debt collector tries to garnish money from your account, your bank or credit union must check to see if any of these kinds of benefits were direct deposited into your account during the last two months. If so, the bank must protect funds that are equal to two months of the specified benefits. If you have funds exceeding two months of benefits, they can be frozen or garnished. If the extra funds are exempt from being garnished or frozen by federal law, you can go to court to request your funds be released. Many people use a prepaid card rather than a traditional bank account. If benefits are direct deposited or loaded onto a prepaid card, they have the same automatic protection as funds in a bank account.

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    Harassment And Call Restrictions

    Debt collectors cannot harass or abuse you. They cannot swear, threaten to illegally harm you or your property, threaten you with illegal actions, or falsely threaten you with actions they do not intend to take. They also cannot make repeated calls over a short period to annoy or harass you.

    Debt collectors cannot make false or misleading statements. For example, they cannot lie about the debt they are collecting or the fact that they are trying to collect debt, and they cannot use words or symbols that falsely make their letters to you seem like they’re from an attorney, court, or government agency.

    Debt collectors cannot call you at unusual or inconvenient times or places. Generally, they may call between 8 a.m. and 9 p.m., but you may ask them to call at other times if those hours are inconvenient for you.

    Debt collectors may send you notices or letters, but the envelopes cannot contain information about your debt or any information that is intended to embarrass you.

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