Social Security is a crucial safety net for many individuals and families in the United States. However, it’s understandable to worry whether your Social Security benefits can be garnished to repay a debt. After all, debt can be a significant source of financial stress, and the idea of losing a portion of your Social Security income can be daunting. Well, it depends on whom you owe your debt. Whether you have debt with a commercial creditor or the US government is one of the deciding factors.
When you have commercial debt
Seniors need to know that their Social Security can’t be garnished or taken from them, even after it is deposited into their bank account or prepaid card.
Before 2011, a senior had to file a “challenge to garnishment” with a court when their bank account was garnished to get their Social Security and other retirement money released or returned.
The delay in getting their money created untold hardships for seniors who needed their money for food, medicine, rent, and other basics. Sadly, many seniors did nothing because they didn’t know better.
Federal banking regulations were changed
So in 2011, new regulations mandated that banks and credit unions examine a garnished account within 72 hours to determine if federal funds – including Social Security – were electronically deposited.
If so, the bank was instructed to automatically protect from garnishment twice the monthly amount of electronically deposited Social Security and federal benefits.
These new regulations protected twice the monthly amount, no matter the source of funds that were in the account at the time of a garnishment.
So, for example, if a senior received $1,200 in Social Security each month, then $2,400 was protected, period. No matter the actual source of funds in the account at the time. It amounted to simple addition- twice the federal benefit automatically protected. Seniors don’t need to do anything.
What’s happening nine years later?
I am the Executive Director of HELPS, a national nonprofit law firm that protects seniors nationwide from unwanted collector contact and helps them maintain their financial independence.
There was a learning curve for banks and credit unions after this rule was implemented in 2011. With a few ongoing exceptions, this federal regulation has been a huge success.
The National Credit Union Administration (NCUA) is an independent federal agency that governs credit unions. A senior recently filed a complaint with the NCUA over the actions of his credit union.
The total balance in his checking account when garnished was well under twice the amount of his monthly Social Security electronically deposited. Yet his credit union took money deposited into his checking account that wasn’t from Social Security to pay a garnishment.
They also charged a garnishment fee prohibited by the 2011 rule. Multiple pleas to his credit union about their error were ignored. The NCUA exonerated the credit union from making a mistake simply stating, “Your protected amount over this period was limited to the funds you receive from Social Security.”
The NCUA, the federal agency that oversees America’s credit unions, apparently doesn’t understand what many consider the most important part of the federal rule that protects bank accounts into which Social Security is deposited.
Specifically, the part specifying that the source of other funds in an account are to be disregarded in determining what money in the account is protected. The NCUA didn’t mention 31 CFR 212.5 (d) which states:
“The financial institution shall perform an account review without consideration for any other attributes of the account or the garnishment order, including but not limited to: (1) The presence of other funds, from whatever source, that may be commingled in the account with funds from a benefit payment.”
Banks too, foul-up, just not as often
HELPS was contacted by an 87-year-old senior whose Bank of America checking account was recently garnished. He receives around $1600 in Social Security each month.
Bank of America placed a hold on the entire balance in his bank account of $1700. A review required by the rule to determine if Social Security was deposited into his account was never conducted.
The Bank of America simply informed him his account was garnished. All phone calls to Bank of America representatives were answered by persons unaware of the rule and unwilling to help.
HELPS is assisting this senior to file a “challenge to garnishment,” which will eventually release his money. But meanwhile, his rent and other bills are due. This difficulty was exactly what this federal regulation was designed to prevent.
Seniors shouldn’t worry
Banks and credit unions, by and large, now have departments that understand and follow this rule correctly. If there is a mistake by a bank or credit union, it can be corrected.
I tell seniors don’t call your bank manager because they have no idea about this rule. Bank managers shouldn’t feel bad. I would guess that 99,9% of attorneys don’t understand this rule.
Seniors, especially the poor and lower-income, are among the most vulnerable in our society. Violations of this federal rule by those who should know better shouldn’t happen.
Several times a year a small credit union gets this federal regulation wrong and honors a garnishment of an account into which Social Security is deposited.
We’ll reach out to the credit union’s legal counsel, and hopefully, their attorney will get them on the right track.
But I am very worried that after nine years the federal agency that governs credit unions, the NCUA, and a bank like the Bank of America still get this basic banking rule dead wrong.
Can they garnish social security for credit card debt?
Federal law protects the following benefits from garnishment and bank levies:
- Civil Service Retirement System
- Federal Employee Retirement System
- Federal Railroad Retirement, Unemployment and Sickness Benefits
- Social Security benefits
- Supplemental Social Security Income (SSI)
- Veterans benefits
Being behind on credit card bills can lead to debt collectors calling for repayment. If a collection agency knows that Social Security benefits are the only income source for a person, they cannot threaten to take those benefits. This is against the law, and the agency can be held responsible for violating the Fair Debt Collection Practices Act.
Find solutions to fight back against harassing collectors.
When you have federal government debt
Student loans and taxes are an all too common debt but you could also be slapped with a bill from other departments. Federal agencies like the FmHA: Farmers Home Administration, RDA: Rural Development Administration, SBA: Small Business Administration, USDA: United States Department of Agriculture, and VA: Department of Veterans Affairs can all levy payments. Because there is no statute of limitations you might be on the hook for debt that you incurred years or decades ago. But unlike the DoEd and IRS, these agencies have no programs to help if you are in poverty or low income. Your only recourse would be bankruptcy to stop the garnishment.
How much of Social Security can be garnished?
It is possible for up to 15 percent of your Social Security to be garnished or offset for past-due debt. But it must leave you with at least $750 in monthly benefits or $9,000 a year. This is well below the poverty line. According to the Department of Health and Human Services’ 2022 poverty guidelines, the poverty threshold for a one-person household is $1,132.50 monthly or $13,590 per year. The poverty guideline was adjusted to $14,580 for 2023 to reflect the excessive inflation due to the pandemic economic recovery.
The Social Security garnishment limit, also known as the “Federal Payment Levy Program” (FPLP), is a provision under the Debt Collection Improvement Act of 1996 that limits the amount of Social Security benefits that can be garnished to satisfy delinquent debts owed to the federal government. This limit applies to most unsettled debts, including taxes, student loans, and overpayments of federal benefits like Social Security.
However, there are certain exceptions to this limit. For example, the garnishment limit does not apply to certain types of debts, such as child support and alimony. Additionally, if a debtor’s Social Security benefits are below a certain threshold, known as the “minimum exempt amount,” they are protected from garnishment altogether.
The minimum exempt amount is calculated as 30 times the federal minimum wage, adjusted annually for inflation. For example, in 2022, the federal minimum wage is $7.25 per hour, so the minimum exempt amount would be $217.50 per week ($7.25 x 30) for social security.
The Social Security garnishment limit is intended to balance the government’s need to collect delinquent debts with the need to protect vulnerable individuals who rely on Social Security benefits as their primary source of income. It is important to note that if you owe a delinquent debt to the government, it is in your best interest to work with the relevant agency to resolve the debt as soon as possible to avoid potential garnishment of your Social Security benefits.
Can social security be garnished for student loans?
I can’t afford to pay this student loan. I had to give up school to become a caregiver for a totally disabled veteran. I don’t get paid for doing this. I get a pittance of Social Security after turning 65, but I can’t afford payments. How do I get the loan forgiven and not pay it? There is no co-signer on the loan – at least I don’t remember having one. We’re talking about almost 40 years ago.
Patricia H in Michigan
Eric Olsen, Executive Director of HELPS Nonprofit Law Firm, answers…
Hi Patricia,
This is a tough situation that many seniors are starting to face with old student loan debt. Student loans are not forgiven except for disability, so forgiveness likely won’t work in your situation.
When can Social Security be garnished?
The loan servicer must give you 30 days’ notice before they can garnish your wages. If you have already received that notice, then you have a limited time to act.
However, you have options that can help you avoid garnishment. Your best option may be to enter a repayment plan with the lender.
An income-driven repayment plan could mean you won’t pay anything
Persons receiving income less than 150% of the poverty line – which is currently $1,610 per month for a single person—can apply for an income-driven repayment plan.
Low-income borrowers who enter this type of repayment plan often pay zero dollars per month for their student loans. The payments are calculated based on your income, so if you are solely receiving Social Security, then your income may be low enough to qualify for a zero-dollar payment.
If the loan is current, you can apply immediately for this plan. Simply call the loan servicer and let them know you would like to enter an income-driven repayment plan. They are required by law to facilitate that for you.
What to do if the loan is already in default
If the loan is in default, then you will need to call the collection agency handling the student loan and asked to be placed in “rehabilitation.”
In rehabilitation, you will need to make monthly payments of a minimum of $5 per month. After six months, there would be no possibility of offset of your Social Security. You should be able to qualify to have the student loan placed in income-driven repayment, possibly with that payment of zero dollars per month.
Even for someone making more than 150% of the poverty line, it’s still possible to get smaller payments and avoid garnishment of Social Security or wages. It’s typically better to enter a plan that allows you to make payments based on your income, rather than just allowing the garnishment which could take more of your Social Security benefits.
You do not need an attorney to apply for income-driven repayment. However, you can contact HELPS Nonprofit Law Firm at (855) 435-7787 if you have any questions. HELPS assists seniors, Veterans, and disabled persons who are facing challenges with debt and collectors.
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