Social Security Disability and Creditors
If you have a debt that has gotten a judgment against you and is threatening a garnishment, can they take your Social Security Disability Insurance (SSDI)? The short answer is no, but there are a few things you may need to do to protect yourself from the hassle.
Social Security Disability Insurance or SSDI is protected from garnishment by the majority of creditors both at the source and in your bank account, with two notable 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 covers more than basic bills.
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 means a creditor may issue a bank garnishment that causes a freeze on the recipient’s accounts, and the recipient 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 your SSDI be deposited into an account by itself, and any other unprotected income be deposited elsewhere.
A handful of creditors may garnish SSDI at the source (meaning they reduce your monthly payment amount), but there are limits on how much they can take. Federal income tax debts may be garnished from your SSDI, but only at a rate of 15%. 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. SSDI recipients cannot simply work more hours or take a second job to make up for garnishments. As a result, their benefits are protected from garnishment by ordinary creditors. 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 clean up their credit and constant phone calls and solicitations for payment.