Can a debt collector take my federal benefits, like Social Security or VA payments?

Before a debt collector can take Social Security or VA benefits, they must sue you and win a judgment against you for the amount you owe. Then, the debt collector must get a court order that tells your bank or credit union to turn over money from your account or prepaid card. This is called garnishment.

The key to making sure your federal benefits are legally protected from being frozen or garnished is to use direct deposit to put the money into your account or prepaid card. You can sign up anytime to have federal benefits direct deposited to your bank account or loaded onto a prepaid card.

As long as I am using direct deposit, which federal benefits are protected?

Money you receive and direct deposit to your account or card from the following government programs is protected:

• Social Security benefits
• Supplemental Security Income (SSI) benefits
• Veteran’s benefits
• Civil service and federal retirement and disability benefits
• Servicemember pay
• Military annuities and survivor benefits
• Federal student aid
• Railroad retirement benefits
• Financial assistance from the Federal Emergency Management Agency (FEMA)

Doesn’t my bank or credit union have to protect two months’ worth of direct deposited benefits automatically?

When your bank receives a court order to garnish money in your account, your bank must look at your account history to see if you received federal benefits by direct deposit in the last two months. Two months’ worth of benefits are protected and remain in your account for you to use.

• For example: If you receive $1,000 in Social Security each month, your bank has records showing $2,000 in Social Security was direct deposited in the last two months. The bank must allow you to use up to $2,000 in the account.
• However, if you receive Social Security or VA benefits by check and then deposit the check into your bank account, the bank does not have to protect two months’ worth of benefits in the account. This means that your entire account balance could be frozen and you’ll need to go to court to prove that it comes from protected federal benefits and should not be garnished.

The debt collector is permitted to garnish money in your account that is over two months’ worth of benefits. If your account has more than two months’ worth of benefits, your bank can garnish or freeze the extra money.

• For example: If you receive $1,000 in Social Security benefits by direct deposit each month, and you have $3,000 in your account, the bank can turn over $1,000 of the $3,000 to a debt collector. The bank must give you access to the remaining $2,000 so you can continue to pay bills and withdraw cash as usual.
• The bank is allowed to charge you a processing fee for the garnishment in this situation.

However, if the extra money is also exempt from garnishment under federal or state law, you may be able to go to court to have your money released.

Can my benefits be garnished to pay my government debts, child support, or spousal support?

Social Security and Social Security Disability Insurance (SSDI) can sometimes be garnished to pay money you owe to the government, such as back taxes or federal student loans, and money you owe for child or spousal support.

Some benefits, such as Supplemental Security Income (SSI), are protected from garnishment – even to pay a government debt or child or spousal support.

Tip

to tell a debt collector that your Social Security or VA benefits are protected from garnishment. You can modify the sample letter to fit your situation – for example, to identify payments that are protected under federal or state law.

Using the courts to release money after garnishment

If your bank garnishes or freezes money in your account, you must be sent a notice of garnishment. The notice explains the court procedures for claiming exemptions from garnishment and getting your money released.

A judge decides whether your money should be turned over to the debt collector, based on factors such as the source of your income and any federal or state exemptions.

It is very important for the judge to know that your money comes from Social Security, SSI, VA, or other federal or state benefits before the judge decides whether your money should be turned over to the debt collector. You should notify the court, the bank, and the person or business that is garnishing your account immediately in writing, and seek help from a lawyer

Consider finding legal help in your state

You may qualify for free legal help. You can find your local legal services program or attorney referral program here

The Eldercare Locator connects older Americans and their caregivers with trustworthy local support resources, including free legal aid for many older adults. You can use the Eldercare Locator

to find services in your area or call 1-800-677-1116.