Social Security Disability, Bankruptcy, and Creditors
If you have a judgment and the only income you receive comes from Social Security Disability (SSDI), your income generally cannot be garnished. There are a few things you may need to do to protect yourself from the hassle and a few things to watch out for.
One Exception- SSDI, Garnishments, and Excessive Bank Account Balances
Most creditors cannot garnish Social Security Disability Insurance or SSDI – be it at the source or in your bank account. However, there are exceptions. If the amount in your account shows you have more than 2 months worth of SSDI funds in it, then the amount exceeding that 2 month protected value can be taken. See 31 CFR Part 212.5-.6 This is usually not an issue for people with SSDI because the amount of SSDI payments rarely exceeds cost of monthly living.
A Second Exemption- SSDI, Garnishments, and Comingled Funds
The other exception is if the Social Security Disability Insurance is deposited into an account where it is comingled with funds from other sources, such as part time jobs or cash given to the recipient as a gift. While the SSDI is still not allowed to be garnished, because the funds have been mixed, it is on the recipient to prove which amount is SSDI and which amount is not. This could still result in a frozen bank account. If your account is frozen, you will have to file something with the court to show the origin of funds in the bank account to prove they should not be garnished. This is a huge hassle and can result in someone not being able to access their protected SSDI for some time. As a result, it is very important that you keep your SSDI benefits in a separate account. Put your other unprotected income in a different account.
Creditors Who CAN Garnish Your SSDI Payments
There are creditors who are still able to garnish your SSDI payments. IRS can garnish your SSDI check , but only at a rate of 15%. If you owe tax debt, get in touch with IRS for payment arrangements or to see if non-collectible status is appropriate. Federal student loans may also garnish your SSDI if you are in default but cannot leave you with less than $750. If you have federal student loans, you may qualify for an income-based repayment program that will stop the garnishment and allow you to pay little to nothing on your loans, so long as you recertify your income every year. Finally, court-ordered child support and alimony can garnish your SSDI to pay this order. Some states limit the amount that can be taken, so it is important to check your local rules.
SSDI is protected by law. If you have debts that you cannot pay and receive SSDI, remember that they cannot take your benefits unless they are a special kind of creditor. If you are threatened with garnishment of your SSDI, and it is not one of the special creditors listed above, call your Attorney General’s office to report it. Creditors are aware of garnishment rules and should not threaten actions they cannot legally take. If the harassment and calls become too much, people who receive SSDI may consider filing bankruptcy to relief anxiety, clean up their credit and constant phone calls and demands for payment.