Learn how to Avoid Social Security Garnishment from creditors, the IRS, and more with simple steps to protect your benefits today.
You can protect your Social Security benefits from almost all of your private credit card companies and other private creditors under federal law. The IRS, child support orders and a few types of federal debt are the only major exceptions. These Legal updates can help you understand your rights and the exceptions that may apply.
My father rang my phone at ten o’clock several years back. His voice was trembling as he told me about a threat from a debt collector who stated they would “take away” his social security benefits if he didn’t pay off a long-standing credit card debt. He was 71 and relied upon his social security payments to survive each month. I recall thinking, “Are they allowed to do this?”
Typically, No. However, the word “typically” masks several major exceptions. My father and I reviewed the law and I want to share our findings with you in order to help you avoid social security garnishment prior to 10:00 P.M. panic.
Who Can (and Can’t) Touch Your Benefits?
Consider your benefits as a house that has a very secure front door. Your private creditors (such as credit card companies, doctors, payday loan lenders, and collection agencies) cannot enter your home. Even if your private creditors obtain a court order against you, the federal government protects your social security from being taken by them.
The government, on the other hand, has a couple of different ways to get to your benefits:
- Unpaid federal taxes (the IRS)
- Defaulted federal student loans and certain other federal debts
- Child support, alimony, or court-ordered restitution
Because there have been recent changes to how student loans operate, make sure you look up the most up-to-date information on StudentAid.gov before assuming anything.
How Long Can the IRS Garnish Social Security?
This question kept my dad up at night, because he also owed an old tax bill.
The Federal Payment Levy Program allows the IRS to deduct up to 15% of your monthly social security benefits (retirement or survivor) from what you would have received. You will always receive at least 85% of your original payment amount. This deduction continues until one of the following occurs:
- You pay your tax debt in full, including penalties and interest.
- The IRS approves a payment plan or an Offer in Compromise.
- You prove severe financial hardship and win “Currently Not Collectible” status.
- The expiration date for the collection statute is usually ten years from the date of assessment.
You should not assume that certain events such as filing for bankruptcy or appealing will cause the 10-year clock to either stop running or start running again.
Good news for SSI recipients: The IRS is not allowed to take any action on your SSI benefits.
Is Your Bank Account Really Safe?
Mainly yes, if you configure it properly. There are two habits that will help you avoid social security garnishment.
Use Direct Deposit.
When you receive electronic benefits payments from the federal government (the Social Security Administration), banks are required to review the previous two months of transactions for any evidence of electronic benefit payments. If they find such evidence, the bank will automatically freeze your Social Security funds until you provide proof of your right to access those funds. This process is not as quick or seamless as it would be if you received a paper check.
Keep Your Money Separate.
If you mix funds, it’s very difficult to get them back out of each other. It’s much better to open a separate bank account to receive your benefits, and use another one to deposit pension or investment income. This creates a clear record of what money is covered by protection.
If your bank does freeze your account, don’t panic. Request the bank to unfreeze the funds and provide the bank with a copy of your benefit statement.
What to Do Right Now to Avoid Social Security Garnishment
Act fast. Follow these steps in order:
- Answer every lawsuit. Respond before the deadline, or you could lose by default.
- Tell your bank the funds are Social Security if it freezes an account.
- Claim your exemption in writing, and keep copies of every letter.
- The IRS can be reached by calling them as soon as possible if you have a tax bill. There are two options for dealing with the bill, an installment plan and/or hardship status.
- Get free help from a legal aid office or a nonprofit credit counselor.
- Deal with the actual debt by either settling it, consolidating it, or creating a debt management plan, prior to the situation getting worse.
Timing is critical. Once your account goes into collections or a judge is involved, your choices become more limited. You can lower some of your balance through settlement (between 30% and 50%), but each situation is unique and fees may be associated with settling, therefore you need to review the small print.
How My Dad’s Story Ended
He knew the credit card collector was lying. There was no way they could take his money through the legal system. The tax bill, however, was legitimate. So he contacted the IRS and created a payment plan; therefore the IRS did not begin taking his money.
I believe that what scared me the most was that I didn’t know. Once he understood the rules of the game, he knew how to avoid social security garnishment and both of us could sleep at night.
FAQs
Can credit card companies garnish my Social Security benefits?
No. Private creditors such as credit card companies, medical providers, payday lenders, and collection agencies cannot garnish Social Security, even if they win a court order against you.
Who can legally take money from my Social Security?
Only a few exceptions exist. The IRS (unpaid federal taxes), defaulted federal student loans and certain other federal debts, and child support, alimony, or court-ordered restitution can reach your benefits.
How much can the IRS take from my Social Security?
Through the Federal Payment Levy Program, the IRS can deduct up to 15% of your monthly benefit, so you always receive at least 85%. The levy continues until you pay the debt in full, the IRS approves a payment plan or an Offer in Compromise, or you win “Currently Not Collectible” status.
Can the IRS garnish my SSI benefits?
No. The IRS is not allowed to take any action on Supplemental Security Income (SSI) benefits.
Why did my bank freeze my account, and what should I do?
Banks review the last two months of deposits for electronic benefit payments and may freeze those funds until you prove they are protected. Tell the bank the money is Social Security, ask them to unfreeze it, and give them a copy of your benefit statement.
Key Taking
- Private creditors cannot touch your benefits. Credit card companies, medical providers, payday lenders, and collection agencies cannot garnish Social Security, even with a court order.
- Only a few exceptions exist. The IRS, child support or alimony orders, and certain federal debts like defaulted student loans can reach your benefits. The IRS can take up to 15% through the Federal Payment Levy Program, and SSI is fully protected from the IRS.
- Set up your bank account the right way. Use direct deposit and keep your benefits in a separate account from other income, so protected funds are easy to prove if a bank freezes your account.
- Act early and respond to everything. Answer every lawsuit before the deadline, claim your exemption in writing, contact the IRS about a payment plan if you owe taxes, and get free help from legal aid or a nonprofit credit counselor.
Additional Resources:
- IRS: Get Help With Tax Debt: The IRS hub for levies, payment plans, and hardship options. SSA’s own page points people here for questions about tax levies.
- CFPB: Consumer Advisory, Your Benefits Are Protected From Garnishment: The CFPB explains when debt collectors can and can’t garnish Social Security. It also covers the automatic two-month bank protection and links to a sample letter.
- SSA: Can My Social Security Benefits Be Garnished or Levied?: The Social Security Administration’s official answer on the laws behind garnishment and levies. It covers child support, IRS levies of up to 15%, and federal non-tax debts.
