Can Creditors Collect Disability Assets?

If you are behind on your bills, you may have creditors and collectors contacting you regularly about your outstanding debts. These collectors often make threats such as lawsuits and attachment to your income and bank accounts. If your income is primarily federal disability income or other federal benefits, you may be exempt from their collections attempts.

Paying Creditors

Generally, courts consider federal disability income to be exempt from garnishment by a debt collector. Disability income includes Social Security disability, or SSI, payments. Most federal pension benefits are also exempt from judgments. Benefits that you receive for service in the military and federal student benefits fall under the same category, and cannot be taken by a court in order to satisfy a judgment for collection of a debt. Generally, the federal government will not honor a request to garnish disability payments for debt collections.

Child Support

Child support debt is treated differently by law. Just as you cannot exempt child support debt in bankruptcy, you generally can't exempt disability income from garnishment to pay child support. The law holds a person's obligation to their children to a higher standard, and will usually allow disability or federal benefits money to be garnished in order to pay this obligation.

Court Hearings

To obtain a garnishment, a creditor must sue you in court and win a lawsuit. After the creditor has won the lawsuit, you are given a certain amount of time to pay the judgment. If you do not pay the judgment in that amount of time, the creditor may ask you to come back to court to determine what you are able to pay. You will be asked about your income, and where it comes from. At this time, the judge will determine if your income is exempt from garnishment. If you have income that can be garnished, the judge will issue orders allowing this.

What If My Account is Frozen?

Since the creditor will not be successful in having the federal government withhold income in order to pay the debt, it may turn their attention to your bank account, trying to get it frozen. If the creditor does this, you will not be able to use the money in your account. If the money in your account is primarily from your disability benefits, that money usually can not be taken to pay a judgment. Contact your bank and ask it to free your account, telling it that the money in the account is exempt from seizure under federal law. If the bank does not release the funds, you will probably need to go to court to have a judge rule that the money is exempt, and issue an order releasing the funds.