When a person in deep debt fails to make payments on his loans, a creditor may seeks to have a portion of the borrower's income garnished. Garnishment must be ordered by a judge before it can be accomplished by the creditor. While most forms of income are subject to garnishment, Social Security benefits are generally exempt.
Features
Under the Social Security program, individuals who are elderly or incapacitated receive regular payments from the federal government. These payments are designed to help them meet basic living expenses, such as food, shelter and clothing. Although Social Security benefits are often received by a person who has other sources of income, sometime they constitute an individual's only source of funds. This is one reason that they are considered a special form of income.
Effects
According to Section 207 of the Social Security Act, the law that outlines most of the rules governing the administration of benefits, benefits are exempt from almost all forms of garnishment. The act states that no benefits shall be "subject to execution, levy, attachment, garnishment, or other legal process" by a private party. However, according to the Social Security Administration, the federal government can garnish wages under certain circumstances.
Significance
According to the Social Security Administration, a creditor seeking repayment for a car loan may not garnish Social Security benefits. The Administration suggests that if a creditor attempts to garnish your benefits, you inform him that he is acting in violation of Section 207 of the Social Security Act. The Administration notes, however, that its responsibility for protecting against illegal garnishment of benefits ends after it pays the beneficiary.
Exceptions
There are instances in which the federal government can garnish benefits. These include to enforce child support or alimony payments, and to pay for unpaid federal taxes. The Internal Revenue Service is allowed to garnish up to 15 percent of monthly wages until a debt is paid off. Other federal agencies are also allowed to garnish money if a debt is owed them.
Warning
According to the financial reference website Financial Web, benefits for creditors seeking repayment for private debts, such as a car loan, may wrongfully confiscate Social Security benefits by removing money from a debtor's bank account. If the creditor has been granted permission from a judge to seize money from a debtor's bank account, and the debtor has deposited her benefits in the bank or had them directly deposited, there is a strong likelihood that the benefits could be illegally seized.
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