Disability income is often, but not always, exempt from garnishment or bank levies. However, it is up to you to notify creditors that some or all of your income is exempt from seizure. By separating your disability funds from other assets, you reduce the chances that you will lose them to a creditor.
Garnishment and Bank Levies
If you are unable to pay a debt and cannot work out a settlement or payment arrangement, your creditor may be able to garnish your wages and any assets in your bank account. In a wage garnishment, your employer deducts the garnishment amount directly from your paycheck, and the funds are then passed on to your creditor. In a bank account garnishment, more properly known as a "levy," your creditor sends the sheriff to the bank to seize funds in your accounts. The creditor repeats the garnishment or levy until your debt is paid off.
Exempt Income and Assets
Federal laws exempt some income sources from garnishment or levies from most creditors, such as Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). State laws may also provide some protection against the garnishment of private disability benefits. Some states exempt the entire amount of a private disability benefit, while other states exempt a portion of the benefit amount.
Garnishment Exceptions
Some creditors can garnish and levy SSDI and private disability benefits. These creditors include private student loan lenders, child support agencies and government agencies, such as tax departments. However, federal law protects SSI from garnishment from any creditor, including government agencies.
Protecting Your Income
Before a creditor can garnish your income or seize your accounts, it must notify you of its plans. If your debt is a business, personal or consumer debt, your creditor must first go to court and get a judgment against you. If the creditor is a government authority collecting taxes, student loans or child support, it does not need to go to court, but it must give you advance notice of the pending levy or garnishment, along with information about challenging the levy/garnishment in an administrative hearing.
The best way to protect Social Security benefits from garnishment is to select direct deposit of your benefits into your bank accounts. Federal law requires your bank to review garnishment requests, along with your accounts, to determine whether any of the funds are exempt from seizure by creditors.
Getting Legal Help
If an unprincipled creditor is garnishing or levying your disability benefits, contact the court that has jurisdiction over your case. You may be able to ask the judge to stop the unlawful garnishment. If you can't afford a lawyer to assist you, contact the Legal Aid Society in your area for help.
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