Disability payments enjoy larger protections against creditor wage garnishment orders than other sources of income, including wages from working and gains from investments. A debtor's short-term or long-term disability payments are usually exempt from garnishment except in cases involving the federal government or a state government as the creditor. A government agency has the power to garnishee just about any source of income, including disability or retirement pay.
Unsecured Creditor Garnishments
Federal and state laws bar a creditor or debt collection agency attempting to recoup an unsecured debt, including a credit card or medical bill, by exercising a wage garnishment order against disability pay. According to Debt Settlement Lawyers.com, short-term or long-term disability pay financed through private disability insurance, an employer, the federal government or state government is exempt from wage garnishment. A debtor should still appear in court when sued by a debt collection agency or creditor to provide the court with proof of disability income.
Secured Creditor Actions
A secured creditor, including a mortgage lender or car lien holder, cannot legally pursue a debtor's temporary disability payments to pay a debt. The creditor or collection agency may still execute a garnishment order for any eligible wages earned from working, though the easiest means to recoup the debt is to repossess the property tied to the debt and auction the property to the highest bidder. A debtor's short-term disability is still exempt if a mortgage lender attempts to sue the debtor for the remaining balance on a mortgage after such an auction.
Delinquent Federal Taxes
A debtor owing delinquent taxes to the IRS could have her monthly disability payments seized by the federal tax agency to satisfy the debt. The IRS may move to seize all or a portion of the debtor's disability income regardless of the source. This means a disabled taxpayer receiving benefits from the Social Security Administration or Veterans Affairs could have payments garnisheed to pay back taxes. A debtor owing taxes to the federal government should remain in regular contact with the IRS to work out a payment plan and minimize the likelihood of a garnishment order.
Child Support Payments
Courts across the country consider domestic support obligations, including child support payments, as priority debts over all other financial obligations. State laws permit child services departments to seize a portion of debtor disability payments, regardless of the source or length of disability payments, to satisfy delinquent child support balances. These agencies may continue to seize these funds for as long as the back balance exists. Debtors refusing to pay back child support balances can face other legal complications outside of garnishment, including jail time and the suspension of professional certifications and licenses.
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