Are Private Creditors Allowed to Garnish Your Disability Benefits?

Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) benefits are often a lifeline for individuals who are unable to work due to a disability. These benefits provide essential financial support, covering basic needs such as housing, food, and healthcare.

However, many people worry about whether these benefits can be garnished by private creditors in the event of unpaid debts. The short answer is no, private creditors cannot garnish SSDI or SSI benefits. The rules governing these benefits extend significant protections against such actions.

The Keener Law Firm in Georgia is a skilled and experienced national disability law practice that has helped thousands of disabled clients get the benefits they deserve. Keener Law Firm understands the intricacies of the Social Security Administration (SSA) regulations and is well-versed in protecting clients from undue financial harm. They know how private creditors are restricted by law from garnishing SSDI or SSI benefits, ensuring that your disability income remains secure.

Legal Protections for SSDI and SSI Benefits

The legal protections for SSDI and SSI benefits are rooted in the federal Social Security Act. This law was designed to protect individuals who are disabled and unable to work by providing them with financial assistance. Recognizing the vulnerability of this population, Congress included strong protections within the act to prevent these benefits from being claimed by private creditors.

Section 207 of the Social Security Act

Section 207 of the Social Security Act is a key provision that addresses the issue of garnishment. It clearly states that the right of any person to any future payment under the act shall not be transferable or assignable, and no money paid or payable shall be subject to execution, levy, attachment, garnishment, or other legal process. This means that SSDI and SSI benefits are protected from the reach of most creditors.

The U.S. Supreme Court has upheld the protections afforded by Section 207 in several cases. In Philpott v. Essex County Welfare Board (1973), the Court ruled that Social Security benefits are not subject to legal processes, even after they have been deposited into a bank account. This ruling reinforced the principle that these benefits are intended to support the basic needs of the beneficiary, not to satisfy the claims of creditors.

Treasury Rule and Bank Account Protections

In addition to Section 207, the U.S. Department of the Treasury has issued regulations that further protect SSDI and SSI benefits when deposited into bank accounts. The “Direct Express” and similar Treasury rules require banks to protect two months’ worth of federal benefits from garnishment if those benefits are directly deposited into the account. This means that even if a creditor attempts to garnish your bank account, the bank is required to leave an amount equal to two months of SSDI or SSI benefits untouched.

This rule provides an additional layer of protection for beneficiaries, ensuring that their essential funds remain accessible for living expenses. It’s important to note that this protection applies only if the funds can be identified as federal benefits. Therefore, it is recommended that beneficiaries keep their SSDI or SSI deposits in a separate account to avoid any confusion with other sources of income.

Exceptions to the Rule

While the general rule is that SSDI and SSI benefits cannot be garnished by private creditors, there are a few exceptions. It is important to understand these exceptions to fully protect your benefits.

1. Government Debts

SSDI and SSI benefits are generally protected from garnishment by private creditors, but they can be garnished by the federal government for certain types of debts. For example, if you owe back taxes to the Internal Revenue Service (IRS), the government may offset your benefits to satisfy the debt. Similarly, if you have defaulted on a federal student loan, your benefits may be garnished to repay the loan. However, the amount that can be taken is limited, and there are specific procedures that must be followed before any garnishment can occur.

2. Child Support and Alimony

Another exception involves child support and alimony obligations. Courts can order the garnishment of SSDI benefits to fulfill these obligations, recognizing that supporting dependents is a priority even when the individual is disabled. However, SSI benefits, which are based on financial need, are generally exempt from garnishment for child support or alimony. The rationale behind this distinction is that SSI benefits are intended to provide a minimal level of income to meet basic needs and are not intended to be shared with others.

3. Federal Benefit Offsets:

The Treasury Offset Program (TOP) is another avenue through which the federal government can collect debts by offsetting federal benefits. Under this program, the government can reduce SSDI benefits to recover certain debts, including overpayments of federal benefits, non-tax debts owed to federal agencies, and delinquent federal taxes. However, like with other exceptions, strict rules govern the amount that can be offset, and beneficiaries are provided with notice and an opportunity to contest the offset.

Protecting Your Benefits

Understanding your rights is the first step in protecting your SSDI or SSI benefits from garnishment. The law is designed to shield these benefits from most creditors, ensuring that they remain available to meet your basic needs. However, the complexity of these protections, along with the exceptions that exist, underscores the importance of seeking professional legal advice when dealing with debt-related issues.

The Keener Law Firm is dedicated to helping clients deal with the legal technicalities surrounding disability benefits. With years of experience and a deep understanding of the SSA’s rules and regulations, Keener Law Firm can provide the guidance you need to protect your benefits from garnishment. We can assist with everything from setting up your bank accounts to ensure that your benefits are protected to representing you in court if a creditor attempts to violate your rights.

If you are receiving SSDI or SSI benefits and are concerned about potential garnishment, it is important to know your rights and take proactive steps to protect your income. The Keener Law Firm in Georgia has the knowledge and experience to help you navigate these complex issues, ensuring that your benefits remain secure. Whether you are facing creditor harassment or need assistance with debt-related legal matters, the team at Keener Law Firm is ready to provide the support you need.