Being approved for Social Security payments when you're disabled and out of work can be a big relief. But if you know that you owe money to creditors out there, you may be wondering just how much of that money you're going to get to keep every month. The good news is that there are only limited circumstances under which your Social Security benefits might be garnished. A lot depends on what type of debts you owe and whether you receive Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI). Take a look at what you need to know about these different benefits and debt garnishment.
The main difference between Supplemental Security Income and Social Security Disability Insurance is that SSI is awarded to people who are low-income and have few or no work credits accumulated before they applied for the benefits, whereas SSDI is awarded to people who have earned work credits. This may seem like a small distinction, but when it comes to debt garnishment, it's pretty important.
Because SSDI is earned with work credits, it's considered earned income in most cases. SSI, on the other hand, is not considered earned income. It's classified as something more like a welfare payment. And while earned income may or may not be eligible for garnishment, welfare payments are definitely not eligible. The only way that you'll end up having to repay SSI money is if the Social Security Administration determines that you were approved wrongfully and should not have had the benefits in the first place. Otherwise, you're pretty safe from creditors.
Because Social Security Disability Insurance is considered earned income, it's not protected in the same way that SSI is protected. However, that doesn't mean that you're entirely unprotected. The truth is that SSDI is still protected from garnishment by most creditors. Repayments for common debts like credit card debts or medical debt cannot be taken from your SSDI payments.
So who can garnish your SSDI payments? The government. If you owe back taxes, the IRS can take up to 15% of your payments to apply toward your debt. Your SSDI can be considered income by the courts when establishing or modifying an order for child support or alimony, so part of your payments can be taken for those purposes. And if you've defaulted on your student loans, you may be subjected to garnishment for those as well. On the bright side, total disability is one of the few conditions that can be used to get your student loans discharged, so you may want to consider pursuing a discharge if you're approved for SSDI payments.
Unfortunately, it does occasionally happen that Social Security payments are improperly garnished when they should have been protected. Often, this happens when the money is taken from a bank account. There are new federal rules that make it more difficult for a creditor to remove protected funds from your bank account and place more responsibility on the bank to protect your funds. Under these rules, a bank that receives a garnishment order must first review your account to see whether you've received protected payments.
Once they determine that you've received SSDI or SSI funds, the bank is obligated to ensure that at least two months worth of these funds are available to you – they can't be removed or garnished. Funds that you've received from other sources, however, may still be subject to freezing or garnishment. If you have your Social Security payments deposited in one bank and then transfer them to another, it may not be immediately obvious to the bank that those payments are protected, and your funds may be frozen while you prove that the funds should not be subject to garnishment. For this reason, it may be better not to transfer Social Security payments if you have any reason to fear garnishment.
If your funds have been garnished improperly, or if you fear that you may be subject to garnishment, you can file a document with the court that states that your income is protected. A Social Security attorney in your area can help you decide how to proceed. You can also visit sites like http://toddeast.com/ to learn more.