Can They Garnish Your Social Security?


If you are an elderly or disabled  American—or are receiving Social Security Payments for any other  reason—you may fear that debt collectors could seize or garnish  your income. You may feel trapped and alone. The debt collectors may have suggested they could, or would take your money if you do not pay them. Can they do it? Not legally, but there are tricks you need to watch out for.



Can they Take Your Money?

If you are dependent upon Social  Security in any way you must read this entire article. You must read  on beyond the simple answer because a little knowledge can be a  dangerous thing—and it is specially dangerous here. The real answer  is different than the short answer.

The Short Answer: Debt Collectors Cannot Garnish Social Security Benefits

The short answer as to whether debt  collectors can garnish Social Security is that, No, they cannot.  Section 207 of the Social Security Act provides that: "none of  the moneys paid or payable or rights existing under this title shall  be subject to execution, levy, attachment, garnishment, or other  legal process, or to the operation of any bankruptcy or insolvency." However, as with so many things in the law, the  simple answer is only the beginning of the question.


They'll Try to Garnish Anyway

Let's consider the way bank accounts  are seized or “garnished.” What happens is that someone obtains a  judgment against another person. As I have pointed out before, these  judgments often come as a result of default judgments—all too often  against people who never owed anybody any money. But once there is a  judgment, it is “collectible.” The collectors have a right to,  and often do, go to the supposed debtor's bank and serve a  garnishment notice on the bank without providing any notice of that  fact to the debtor.

The garnishment takes effect  immediately and “freezes” the account. The bank will not honor  any outstanding checks (unless the account balance is larger than the  debt owed) until the account becomes “unfrozen.”  The bank then  prepares and sends notice to the debtor. As far as I can tell, the  bank is rarely in a hurry to do this: they will be charging overdraft  or NSF fees for every check that bounces. It is a tremendous windfall  for the bank. A few days later, the horrified debtor learns that his  or her checks have been bouncing and huge fees accumulating.

Frozen Accounts Mean No Money Even If the Money Cannot Be Legally Garnished

In most states, the banks hold the  assets they seize for a period of time before turning them over to  the debt collector. During this time, the debtor can—if they have  the resources and emotional presence of mind—challenge and stop the  garnishment. But this takes time, at best. And during that time a  person of limited income could be evicted, be unable to purchase  medicine, or other essentials. And the banks are charging fees which  they may, or may not, ever return.

There have been a number of news  accounts of collection activities in New York City and elsewhere. The  debt collectors were garnishing the bank accounts of the elderly  whose accounts were undeniably largely—and often exclusively--made  up of Social Security payments. During the litigation to untangle the  amounts of garnishable versus ungarnishable amounts, the elderly were  facing homelessness and other deprivations. Some of them died, and  hundreds of thousands or millions were subjected to extreme hardship  and crisis. 

For a little more of this tragic and  horrifying story, read “Unholy  Alliance of Bank and Collection Agency Fleeces Social Security  Recipients,”  Rowley, Nov 07, If you read the Rowley article, you will notice that all the  dispossessed had one thing  in common. They were all trying to work  with the debt collectors. The elderly were trying to pay, and were  paying, and of course this is the way the debt collectors knew where their bank accounts were. Do not make that mistake: do not allow the  debt collectors to know where your money is.

In New York, landmark legislation is now protecting the elderly. Social Security Rights. However, these protections do not extend beyond New York. Thus you  may be at risk if your city or state has not passed similar laws, and I  am not aware of any that have.

A Possible Solution You Need to Try

If the debt collectors know about your  bank accounts, you face a similar risk. One possible solution is to  have two bank accounts: one which is exclusively funded by Social  Security or other exempt payments, and the other which is not. Notify  the bank receiving Social Security payments that the account consists  exclusively of Social Security payments. I would also suggest that  the accounts should be in different banks, and information regarding  the non-exempt account should never be given to the debt collectors.  That means that if you are going to use money from the non-exempt  account to pay a debt collector or troubled account, you should turn  it into a postal money order rather than send a check. A still safer  approach is to make all payments with money orders.

Don't Just Give them a Judgment

The actions I suggest above may not completely  eliminate the risk, but they go a long way towards protecting you from some of the worst consequences of debt collector damage. But this speaks to the "worst case" scenario - where the debt collectors have a judgment and are trying to collect. If you've read my other articles, you know I believe you should never let them start with that advantage.

For help defending yourself in litigation, I recommend the Debt Defense System Dashboard. For help negotiating debts to settle them and make them go away, try the Debt Negotiation System Dashboard. Both are designed to work along with the membership to give you a tremendous amount of information.

Can they Garnish my Social Security Benefits?

People on Social Security--either disability or retirement benefits--are uniquely vulnerable to debt collectors. They aren't supposed to be able to garnish your Social Security, but you need to watch this video if debt collectors are after you and you are dependent on Social Security benefits.

For help defending yourself in litigation, I recommend the Debt Defense System Dashboard. For help negotiating debts to settle them and make them go away, try the Debt Negotiation System Dashboard. Both are designed to work along with the membership to give you a tremendous amount of information.


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