Dolores M. Coulter

Attorney at Law

8341 Office Park Dr. Ste C

Grand Blanc, MI 48439

Phone:  (810) 603-0801

 Email: coulterdm@sbcglobal.net

Social Security Garnishments

Dolores M. Coulter © February 2009

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Q.      I have a lot of medical bills and some other bills that I can’t afford to pay that have been turned over to collection agencies.  I need all of my income, which is just Social Security and a small pension, to pay my regular monthly expenses.  I have no money left at the end of the month to pay the old bills. I’m worried that the collection agencies might be able to take the money in my bank account.  Can they do that?

Most seniors have their Social Security and pension checks direct-deposited into a bank account rather than receiving monthly checks in the mail.  As of May 1, 2011, all persons applying for Social Security benefits were required to have their checks direct-deposited. Current recipients were allowed to receive paper checks until March 1, 2013.  After that date all recipients were required to switch to direct deposit or a debit card.   The Social Security Administration will grant an exception for persons born before May 1, 1921 and in certain other rare circumstances.   Direct deposit saves the cost of mailing millions of checks each month and also reduces the chances that a check can be lost or stolen and eliminates the need for a trip to the bank to cash or deposit the check. When the Social Security Act was passed in 1935 it created a social insurance program that promised workers who paid into the system a secure source of income during their retirement years.  As part of that promise the Social Security Act included a provision that protects Social Security benefits from garnishment. This protection from garnishment is very comprehensive but there are some important exceptions.

It is important to keep in mind that, except for the IRS and state tax agencies, a creditor cannot garnish your bank account or place a lien on your property in order to collect an unpaid debt without first filing a lawsuit and getting a judgment against you. The creditor must serve you with a copy of the summons and complaint and you then have an opportunity to contest the claim in court.  If you do not contest the claim or if the court finds that you owe the money, the court will enter a judgment against you. At that point the creditor can take steps to collect the judgment.  However, as I mentioned above, Social Security benefits are exempt from garnishment.  This exemption provides several very important protections for Social Security recipients. 

First of all, the creditor cannot get a court order to require Social Security to deduct a certain amount from your check each month to pay the judgment.  Secondly, as of May 1, 2011, a bank that receives a garnishment order is required to review its records to determine whether a Social Security check has been direct-deposited into the account within the past 2 months. If so, the bank must determine the “protected amount” [the lesser of the total amount of exempt benefits deposited in the account during the two month period or the current balance in the account]. The bank cannot put a hold on the “protected amount” and must allow the account holder full access to those funds. The bank may not deduct any garnishment fees from the protected amount. This protection applies even if the Social Security benefits have been commingled with other funds such as a pension check from a private employer. SSI (Supplemental Security Income), Veterans benefits, and federal employee retirement checks receive the same level of protection from garnishment as Social Security benefits.

However pensions from private employers do not enjoy the same level of protection from garnishment as Social Security benefits. A creditor who has a judgment against you cannot get a court order requiring the company that pays your pension to deduct a certain amount from your check each month to pay the judgment. However, unlike Social Security, once the pension check in deposited into a bank account the pension money is not protected from garnishment.

There are some important exceptions to the protection of Social Security benefits from garnishment. Social Security benefits can be garnished to pay child support, spousal support (alimony), federally-guaranteed student loans, federal taxes, and other debts owed to federal agencies. An amount can be deducted directly from your Social Security check for these types of obligations.  For debts owed to the federal government other than taxes, the first $750 of your monthly Social Security benefit is protected and no more than 15% of your check can be garnished. For unpaid federal taxes, 15% of your check can be garnished. Up to 65% of your check can be garnished for unpaid child support. SSI (Supplemental Security Income) benefits are not subject to these exceptions and thus remain completely protected.