Can Creditors Garnish Social Security Benefits?

If you’re way behind on your credit card or conventional mortgage or car loan payments … well, our sympathies. It’s a tough place to be. Debt collectors and creditors want their money, naturally, and they have some aggravating ways to try to get it. It isn’t pretty. But is it so ugly that creditors can get their mitts on your Social Security benefits, too? Can they garnish that part of your income?

Thankfully, the answer is no.  Well, mostly no. Usually no. It depends on who you owe.

Your Social Security benefits can’t be garnished for credit card debt or for nonpayment of a private mortgage or car loan. Section 207 of the Social Security Act spells that out.

But if you owe money to the federal or state government – primarily income taxes and student loans, along with other exceptions we’ll get to later – then those bets are off. Garnishment is a possibility.

You worked hard for your Social Security benefits. You want to keep them. The best way to do that is to understand how and when they’re protected from creditors, how and when they’re at risk of being garnished, how the other parts of your income and bank accounts are vulnerable, and what you can do when creditors come after your money.

» Learn More: What is Social Security?

Protected Social Security Benefits

Let’s start by making sure we know what “garnish” means. It’s a gnarly word, at least as it relates to your finances. In that context, “garnish” is a legal process in which a creditor takes money directly from your wages or your bank account to recoup what you owe. Like we said, gnarly.

When the debt in question is to a private or commercial creditor, garnishment can’t come into play with your Social Security benefits or benefits from other federal programs such as the Veterans Administration. They can’t be taken away from you by a credit card company or mortgage company looking to recover the money they’ve lent you.

These are among the benefits and programs, including Social Security, the federal government protects from garnishment by private creditors.

• Social Security: Monthly retirement income for people who paid into the system (FICA taxes) while they worked.
• Social Security Disability: Income for people who have paid FICA taxes, but are unable to work due to a medical condition expected to last at least a year or result in death.
• Supplemental Social Security (SSI): Income for people with a disability on a limited income regardless of whether they had FICA taxes deducted from their pay. (Note: Even the federal government can’t garnish SSI benefits.)
• Medicare: Health insurance benefits for people who are 65 or older, including those with disabilities.
• Military retirement pay: Monthly benefit paid to retired military members for the rest of their life.
• Veterans benefits: Pensions, home loan guaranties, health care and compensation payments for disabilities or death related to military service.
• Income and other benefits from the Civil Service Retirement System
• Income and other benefits from the Federal Employee Retirement System
• Income from the Federal Railroad Retirement program, including unemployment and sickness benefits.

If you’re receiving benefits from any of those programs, you can rest easy in the knowledge that the gnarly definition of “garnish” won’t apply when it comes to your credit card and most other loan debts.

Banks & Credit Unions

Among other protections for your benefits, your bank or credit union can be your friend if a creditor tries to come after your nest egg. When a court orders money in your account to be garnished, your bank or credit union must by law immediately shield your last two months of deposits from Social Security or other protected federal benefits. You can get to that moola; your creditor can’t.

There are a couple of catches, though. The benefits must have arrived at the bank or credit union by direct deposit. If you get benefits checks from Social Security and deposit them yourself, the bank doesn’t have to protect the last two months’ worth. And if the amount in your account is greater than the two months of benefits, the difference is subject to being garnished or frozen by the bank. In either case, you might need to go to court to prove that money is a protected benefit and shouldn’t be subject to garnishment.

When Can Creditors Garnish Social Security?

So far, we’ve given you the good news about the bubble wrap around your Social Security benefits. They can’t be garnished if the money you owe was lent to you by a private creditor, so credit card debt, auto loans, most mortgage payments and most medical bills won’t put you at risk of losing those benefits.

But as we mentioned earlier, there’s bad news, too. In some circumstances, the federal government can legally come after them via garnishment. Why? Because it’s the creditor. We’ll look next at how and when that can happen.

For Federal Income Tax

You already know this: The Internal Revenue Service doesn’t look kindly on people who don’t pay their taxes. If that’s you and you’re collecting Social Security, the IRS can get what’s owed by garnishing your Social Security benefits through the Federal Payment Levy Program. That program allows the government to hold back some of your monthly benefits until you’ve paid off your tax debt. The IRS can’t withhold it all, but it can keep up to 15% of your monthly payment benefit. It doesn’t have to go to court to start that process, and you aren’t able to appeal the cuts in your monthly benefit. The lesson: Pay your taxes!

» Learn More: What if I Can’t Pay My Taxes?

For Federal Student Loans

Most student loans – 92.5% to be exact — come from the federal government, which makes it the creditor. That means, as with back taxes, it legally can withhold up to 15% of a borrower’s monthly Social Security benefits when he or she isn’t making the required payments, and the loan service provider has given 30 days’ notice.

The government’s pandemic-era pause on student loan repayments technically ended on Sept. 30, 2024, and though the Biden Administration has continued to look for ways to forgive student loans for many people saddled with that debt, those moves are still tied up in the court system. Bottom line: It’s difficult to know the future of the repayment requirement and, thus, the federal government’s interest in withholding Social Security benefits for non-payment of those loans.

If it turns out you still need to pay off your student loans even as you approach retirement age … well, your Social Security benefits might still be at risk of garnishment. Does it help to know you won’t be alone? The Federal Reserve Board’s 2022 Survey of Consumer Finance found that more than 1.4 million workers or their spouses aged 55 or older and over 820,000 unemployed individuals or their spouses aged 55 and older still carry outstanding student loans.

For Delinquent Child or Spousal Support, or Victim Restitution

The 15% of your benefits that can be taken for back taxes or student loan delinquency looks like small potatoes next to what’s at risk if you don’t meet your child support obligation. The government can take up to 60% of your monthly Social Security benefits for that transgression, and it can tack on another 5% if you’re in arrears for 12 weeks or more. If you’re behind on payments for the support of more than one child, the Social Security Administration can take a percentage of your benefits for each child as long as it doesn’t exceed the 60% total. And even if your child support delinquency is administered by a state rather than the federal government, your Social Security benefits can be garnished to pay what you owe.

If you aren’t keeping up with court-ordered spousal support (alimony), your Social Security benefits can be garnished up to 50-60% of your monthly benefit, with that extra 5% added on for lengthy arrears. And if you’ve been ordered to make restitution to the victim of a crime you committed and don’t keep up with those payments, your Social Security is subject to a maximum garnishment of 25% of your monthly benefit.

» Learn More: Single Parent Debt Relief

How Creditors Can Collect Payments

Let’s say you’re retired, or you’re disabled and can’t work. You know now that your Social Security benefits can’t be garnished for credit card debt or by other private or commercial creditors. And because you’ve been diligent about keeping up with your taxes and student loan payments and aren’t liable for child support, alimony, or victim restitution, you know the federal government can’t come after your Social Security, either.

Are you safe from the financial harm a creditor can inflict?

Not exactly. Early on in this story, we mentioned that creditors have some aggravating ways to try to get the money they’re owed. Even if the primary source of your income is your protected Social Security benefits, they can make your financial life miserable.

Here are some of the tactics they can use that don’t involve your Social Security:

• Collections agencies. If you’re six months or more in arrears with a creditor, he, or she (or it) can sell the debt to a collector whose job is to make you pay up. Debt collectors aren’t shy about phoning you repeatedly or sending a steady stream of warning messages in your direction. They can’t legally ‘harass’ you, but your view and the law’s view of harassment might not jibe. We’ll get to that a little later.
• Reporting negative information to credit bureaus. They can crater your credit rating by making sure the three major credit bureaus are aware of your debt delinquency. That hurts the credentials you need to get lower interest rates on other loans and credit cards, a bigger credit limit, and better terms when you rent or buy a home or lease or buy a car.
• Court-ordered seizure. They can go to court for permission to take any money in your bank account that isn’t from a Social Security payment. (Remember, your bank or credit union must protect the last two months of Social Security direct deposits.) They can also get permission to take possession of whatever collateral you used to secure the loan you haven’t paid back.
• Placing a lien on your home. The definition of ‘lien’ is scary. It’s a court order that gives a creditor the right to an asset such as your house until you pay back your debt. In most cases, you won’t be able to sell your home until the lien is resolved.
• Seizing your tax refund. When you owe the government (federal or state), it can take your tax refund to satisfy the debt. In some states, private creditors can get to your tax refund, too, once you’ve deposited it into your bank account.

Dealing with Creditors

You have options. It might not feel like it if you’re in debt so deep that your protected Social Security benefits won’t suffice and you’re facing a lien on your house or the loss of your car, but your situation isn’t hopeless if you’re willing to confront your financial situation head-on and take steps to improve it.

Here are some of the ways you can keep the creditors at bay.

• Credit counseling. Before you try anything else, solicit advice from an expert on fixing financial problems. A counselor at a nonprofit credit counseling agency will review your situation, discuss your options, and make informed recommendations about how to eliminate your debt. A credit counseling session is free and can usually be done over the phone.
• Budgeting. Creating a monthly budget that details your spending against your income is a road map to making ends meet. When you stick to it, a budget can get you out of credit card debt and build a nest egg for your future at the same time.
• Debt management plan. If credit card debt is the problem, a debt management program can clear away some of the obstacles you’ve encountered in paying it back. Nonprofit credit counseling agencies have agreements with credit card companies to lower interest rates and monthly payments to an affordable level so your debt can be paid off in 3-5 years.
• Debt consolidation. This can be helpful when you’re dealing with more than one credit card balance. Debt consolidation involves taking on one new loan to pay off two or more existing debts. The new loan should come with a lower interest rate and lower monthly payments than the sum of the debts you consolidated, saving you money.
• Debt settlement. For a fee, a private debt settlement company will negotiate on your behalf with your creditor or creditors to reduce the amount you owe. There are no guarantees the negotiations will be successful, but it’s possible your balance could be reduced by as much as 50%. During that process, you stop making payments on the debt but start making regular deposits into an escrow account with the settlement company.
• Bankruptcy. It’s usually a last resort, but bankruptcy can help you regain control of your finances by having most or all unsecured debt – credit cards, medical bills, personal loans – discharged by a court so you can start over again.

Credit counseling and budgeting are no-risk moves. But there are cons as well as the pros we just mentioned to each of the last four tactics on this list. Before you dive into any of them, make sure you explore their fit with your specific financial circumstances.

Debt Collector Harassment

If your debt has been turned over to a collection agency, you can expect to be hounded to pay up and it likely won’t be a pleasant experience. But you should know that a debt collector can only go so far, thanks to protections from harassment, bullying and threats under the Fair Debt Collection Processes Act (FDCPA). As we mentioned earlier, harassment to you might not be harassment according to the FDCPA, but you do have some rights against debt collectors.

For example, a debt collector can’t contact you at an unusual time; generally, contact must be made between 8 a.m. and 9 p.m. Nor can a collector pester you at your place of work. A debt collector can’t use social media to publicize your debt, though he or she can use social media to contact you privately. And if you’ve hired an attorney to help you deal with your debt, the debt collector must stop contacting you and work through your lawyer instead.

There are also elderly debt collection laws protecting seniors against harassment from collection agencies.

» Learn More: How to Stop Debt Collectors from Calling

What to Do If Your Bank Account is Garnished or Frozen

When your bank account is being garnished, you’ll get a legally mandated notice that includes an explanation of how you can try to stop the process and how you can claim your Social Security benefits are protected. When you get it, don’t wait to respond, especially if you didn’t use direct deposit to get those benefits into the bank.

If you don’t use direct deposit, the bank won’t automatically protect the last two months of Social Security benefits, which means it will be up to you to prove how much of your balance should be exempt from the garnishment. You’ll have to convince the bank and perhaps a court that the freeze on those funds should be lifted.

Maybe you’ve already been working with your creditor to satisfy the debt you owe. If you haven’t, now is the time to start that process. You might get some understanding that way.

Except for access to your funds from protected Social Security benefits, your banking hands will be tied under a freeze. You won’t be able to withdraw or transfer money, make purchases with a debit card, or make payments with a check or autopay. Obviously, it will complicate your life. For that reason, it’s important to contact an attorney who specializes in debt collections or consumer law even if it means adding an extra expense to your already-overburdened finances. To minimize the damage garnishment can do, it’s worth it.

» Learn More: How to Dispute Collections

Work with a Professional

Remember, you don’t have to navigate the murky waters of debt and your Social Security benefits by yourself. A certified credit counselor at an agency with the National Foundation for Credit Counseling (NFCC) can answer your questions about how to protect what’s coming to you and will work with you on finding the best solution to your financial problems.

Counselors are trained and certified in the areas of budgeting, consumer credit, money, and debt management. Your counselor will discuss your financial situation, examine your income and expenses, review your credit report, and help you develop a personalized plan to solve your money problems.

The only agenda a counselor brings to your session is your financial well-being. Nonprofit agencies are required by NFCC regulations to give consumers the best debt-relief options for their specific circumstances.

If you are uncertain about the status of your Social Security benefits in the face of past-due debts and the possibility of garnishment, don’t hesitate to contact a counselor at a nonprofit credit counseling agency such as InCharge Debt Solutions. An InCharge counseling session is free, can be done over the phone, and usually lasts about 40-45 minutes.