Can Creditors Take Your Social Security Disability Benefits?

If you are like millions of Americans who rely on Social Security retirement or disability benefits as your primary source of income, a reduction of even a small portion of your benefits could have a devastating impact on your family. If you have fallen behind in paying your bills, you may worry that your benefits could be garnished by your creditors.

Here is some good news for you: Generally speaking, creditors cannot garnish your Social Security disability benefits without your permission. This applies to Social Security retirement money, as well. However, there is one big exception to this rule.

Federal law protects your Social Security disability checks from debt collectors, but not from the federal government itself. Generally speaking, the government can withhold up to 65% of your Social Security Disability Insurance (SSDI) payments or Social Security retirement benefits to cover unpaid child support, alimony, back taxes or other debts owed to the federal government. Unpaid, federally guaranteed student loans are another situation where the government can tap into your disability checks. The feds do not need your permission to withhold disability funds in these situations. However, by law, you must be left with $750 per month in benefits after any government seizure. But there is one more big exception—when you owe Uncle Sam unpaid federal income taxes, the government can take whatever amount it wants to get the money it’s owed.

If you receive Supplemental Security Income (SSI) payments, they are protected from everyone and cannot be garnished even by the federal government.

Before we leave this topic, let us add a cautionary note. Creditors are not barred from taking other legal action. They may go after other assets you have. For this reason, we strongly recommend to our clients that they keep their Social Security funds in a separate account. Attorney Tom Nash points out: “If Social Security money is left in a bank account that is mingled with other monies, it can be hard to show that creditors took the Social Security money. If a creditor grabs your money, it is often very hard or even impossible to get it back.”

Note: This is general information only and should not be construed as legal advice. Please consult an attorney about your specific garnishment situation or other legal claim.