Debt is a problem for millions of Americans and some of those Americans are receiving Social Security benefits. A question that seems to arise when many people are going through the Social Security disability process is “can my Social Security benefits be taken away if I become delinquent on my debt?” The answer is maybe.
It really depends on the type of debt a person has acquired to determine if their Social Security benefits are subject to garnishment. The quick answer is that if you owe money to the government, in the form of student loans or back taxes, you have child support obligations that are not being met, or you have court-ordered debt then it is very possible your benefits could be garnished if you fall behind on payments. The Motley Fool recently published an informative breakdown of what types of debt could put some of your Social Security benefits at risk. Below is a portion of that story.
Here are some scenarios where delinquent debt could result in smaller Social Security checks:
- You’re behind on your federal student loans. Social Security can withhold up to 15% of your benefit if you’re behind on student loans. However, the first $750 a month of benefits is off limits.
- You owe back taxes. The IRS can garnish up to 15% of your benefits if you have delinquent taxes. Unlike with student loans, the first $750 isn’t protected.
- You’ve been ordered to pay child support or alimony. If you’re behind on court-ordered child support or alimony, up to 50% of your benefit can be garnished if you support a spouse or child who isn’t the subject of the court order. Otherwise, up to 60% of your benefit can be garnished. If you’re more than 12 weeks behind, an additional 5% can be seized.
- You owe court-ordered restitution to a victim as part of a criminal case. Up to 25% of your Social Security could be garnished if you’re behind on restitution payments to the victim of a crime you’ve been convicted of committing.
Note that in all of these cases, your Social Security will only be reduced if you’re delinquent on payments. Your benefits won’t be withheld just for owing the debt. If your Social Security benefits are garnished, only your current and future monthly benefits will be affected. Social Security won’t go after payments retroactively.
What debt is off limits?
- Private creditors can’t garnish your Social Security. If you have credit card debt, medical debt, private student loans, a car loan, or a mortgage, your benefits won’t be affected if you get behind on payments.
- Of course, the consequences of missing these payments are still serious. Obviously, you could lose your home or vehicle if you fail to make mortgage or car loan payments. Becoming delinquent on any of the payments listed above will still tank your credit score.
- If you’re working while collecting Social Security, a private creditor could sue you and obtain a judgment to garnish part of your paycheck. A private collector could also win a judgment to garnish your bank account. However, for Social Security and many other federal benefits, two months’ worth of payments are generally protected from seizure.
