What Incomes Cannot Be Garnished?

Garnishment allows debt collectors to take money from a debtor's bank accounts or wages to satisfy a court judgment or government tax levy. Garnishment has such a potentially devastating effect on finances that it forces some people into bankruptcy. However, protection from garnishment is available on certain incomes.

Exemptions

Income from retirement pensions is usually exempt from garnishment, and the U.S. Department of Treasury reports that certain income from the government is also usually exempt. Federal law exempts garnishment of Social Security benefits, Veteran's Administration payments, Supplemental Security Income benefits, benefits from the Office of Personnel Management and Railroad Retirement benefits.

Exceptions

Although certain incomes have protection from garnishment, there are loopholes allowing garnishment on all incomes. For example, the Internal Revenue Service can garnish any income for delinquent income taxes, and child support enforcement agencies can also garnish all incomes for past due child support payments. In addition, banks and credit unions are not required to give debt collectors information about money on deposit in a debtor's account. A bank receiving garnishment orders usually will grant full access to the debtor's account. The debtor could have pension benefits or Social Security payments in the account but at least initially, that may not prevent the garnishment. It's the debtor's responsibility to inform both the bank and the debt collector about the presence of protected funds in an account.

Provisions

Some people facing garnishment may choose to open checking or savings accounts specifically for the deposit of Social Security payments and other types of income protected from garnishment. This allows them to inform their bank and debt collectors that the money in the account is off limits for garnishment. The Social Security Administration advises Social Security recipients to inform creditors that garnishment of Social Security benefits violates Section 207 of the Social Security Act. However, the agency reports that the benefits must be identifiable as Social Security income, and that is why some people set up special accounts for income protected by garnishment.

Solutions

Bankruptcy is an extreme strategy managing garnishment, but it does work by immediately ending all types of garnishment. However, bankruptcy should be avoided if possible because of its effects on credit. Other solutions are available. For example, debt collectors may agree to end all garnishment efforts in exchange for a debt settlement agreement paying off the account or a payment plan allowing installments.