Once debt collectors have made multiple attempts to contact you about a debt, their next step is often filing a lawsuit against you. If the collectors win the lawsuit and obtain a judgment against you, the court can issue an order for wages to be garnished or bank accounts to be levied or garnished to recoup the amount owed to the creditor. (Frequently, the term "levy" is used when a creditor seizes funds from a bank account, and "garnish" is used when it seizes a debtor's wages withheld by his employer.) Legally, Social Security Disability Income (SSDI) is protected from garnishment. Unfortunately, the burden of proving that an account is composed of Social Security funds falls on the SSDI recipient.
Social Security Garnishment Law
Social Security retirement payments and SSDI are both protected from garnishment under Section 207 of the Social Security Act. The Social Security Administration will actively protect your funds until you receive them. From that point, your funds are still protected, but Social Security won't actively intervene if your bank account is garnished (levied) incorrectly. Section 207 protects funds that are identifiable as Social Security, so if your SSDI payment is deposited into an account that also has deposits from other sources (family or work, for example), the SSDI payment is no longer easily identifiable.
Exceptions
In general, government agencies can garnish a limited amount of your SSDI or other Social Security income from your bank account. The Internal Revenue Service can garnish wages or levy accounts for back taxes, for example. Child support enforcement can also garnish your SSDI or retirement benefit. Civil penalties can also be garnished or levied. These garnishments all take place at the Social Security level, so they're completed well before your money reaches your bank account.
Bank Account Garnishment
Even though your SSDI or Social Security retirement benefit aren't supposed to be garnished (levied), the reality is that banks often allow the garnishment. Banks, especially large ones, receive thousands of garnishment requests, so they may not fully investigate each one. You, as the SSDI or retirement benefit recipient, need to contact the court and your local sheriff to contest the garnishment, citing Section 207 of the Social Security Act. You may need to complete paperwork and submit documentation of your benefits to the court, the sheriff and your bank.
Ways to Prevent a Garnishment
If you're on SSDI or Social Security retirement and have been sued for a debt, you should consider transitioning your SSDI benefits to Social Security's Direct Express debit card, rather than using a bank account. You can use the debit card to make purchases, and you can also withdraw cash. This can make paying bills more difficult, as you would need to purchase money orders or cashier's checks rather than writing a check. Another option is hiring a lawyer. Not only can a lawyer handle the paperwork, but your lawyer may have a relationship with a bank where you can deposit your SSDI benefit money without any danger of a garnishment. The lawyer guarantees the bank that your account is exempt from garnishment. A lawyer may be a bit expensive, but the account protection may be worth the investment.
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