People on Social Security–either disability or retirement benefits–are uniquely vulnerable to debt collectors. They aren’t supposed to be able to garnish your Social Security, but you need to watch this video if debt collectors are after you and you are dependent on Social Security benefits.
Can They Garnish My Social Security?
If you are dependent on Social Security, you may fear that debt collectors could seize or garnish your income. The debt collectors may have suggested they would do so if you don’t pay them. Can they do it?
Read the Whole Answer! The real answer is somewhat different than the short answer.
The Short Answer
The short answer as to whether debt collectors can garnish Social Security is that, “No, they cannot.” There are some exceptions relating to child support and money you owe the federal government. These obviously do not apply to credit card or consumer debt.
Section 207 of the Social Security Act provides that: “none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.”
However! As with so many things in the law, the simple answer is only the beginning of the question.
The Real Answer
The “Real” answer is a little different than the short answer.
Let’s consider the way bank accounts are seized or “garnished.”
What happens is that someone obtains a judgment against another person. As I have pointed out before, these judgments often come as a result of default judgments—all too often against people who never owed anybody any money. But once there is a judgment, it is “collectible.” The collectors have a right to, and often do, go to the supposed debtor’s bank and serve a garnishment notice on the bank. They can do this without warning or any notice to the debtor, and they usually do not provide notice.
The garnishment takes effect immediately and “freezes” the account. (The bank will not honor any outstanding checks (unless the account balance is larger than the debt owed) until the account becomes “unfrozen.”)
The bank then prepares and sends notice to the debtor. As far as I can tell, the bank is rarely if ever in a hurry to do this. They will be charging overdraft or NSF fees for every check that bounces. It is a tremendous windfall for the bank. A few days or a week later, the horrified debtor learns that his or her checks have been bouncing and huge fees accumulating.
Frozen Accounts Mean No Money Even If the Money Cannot Be Legally Garnished
In most states, the banks hold the assets they seize for a period of time before turning them over to the debt collector. During this time, the debtor can—if they have the resources and emotional presence of mind—challenge and stop the garnishment. But this takes time, at best. And during that time a person of limited income could be evicted, be unable to purchase medicine, or other essentials. And the banks are charging fees which they may, or may not, ever return.
There have been a number of news accounts of collection activities in New York City and elsewhere. Debt collectors were garnishing the bank accounts of the elderly largely—and often exclusively–made up of Social Security payments. During the time it took to figure things out, the elderly suffered homelessness and other deprivations. Some of them died, and hundreds of thousands or millions were subjected to extreme hardship and crisis. Many never got their money back, and many more never got their bank fees back.
For a little more of this tragic and horrifying story, read “Unholy Alliance of Bank and Collection Agency Fleeces Social Security Recipients,” Rowley, Nov 07 .
The Cooperative Were Victimized
In New York, all the dispossessed had one thing in common. They were all trying to work with the debt collectors. The elderly were trying to pay, and were paying. Of course this is the way the debt collectors knew where their bank accounts were. Do not make that mistake. Never allow debt collectors to know where your money is.
In New York City, landmark legislation is now protecting the elderly. See, SSI Disability-Rights. However, these protections do not extend beyond New York. Thus you may be at risk if your city or state has not passed similar laws. I am not aware of any that have. And of course the New York laws come too late to help those who died as a result of the debt collectors’ actions.
A Possible Solution You Should Try
If the debt collectors know about your bank accounts, you face a similar risk. One possible solution is to have two bank accounts. One should be exclusively funded by Social Security or other exempt payments, and the other should have no exempt money in it.
Separate the Accounts
Notify the bank receiving Social Security payments that the account consists exclusively of Social Security payments. I also suggest that the accounts should be in different banks. And information regarding the non-exempt account should never be given to the debt collectors. That means that if you are going to use money from the non-exempt account to pay a debt collector or troubled account, you should pay with a postal money order rather than by check. A still safer approach is to make all payments on difficult accounts with money orders.
I realize this is difficult for people who are proud of paying their bills, but debt collectors do not play fair. If you are having difficulty making payments, or are disputing a bill, you should take precautions. You can still pay the bills when you have the money.
These actions will not completely eliminate the risk. But they go a long way towards protecting you from some of the worst consequences of debt collector damage.
If they still manage to find and garnish your social security, remember they don’t have the right. Find a lawyer and fight it.
Guide to Legal Research
If you are defending yourself pro se from the debt collectors, you will need to do legal research along the way. This product guides you through the most important and easiest ways to do that. There are important how-to’s. And warnings along the way to make sure you don’t lose anything while looking for a shortcut.
You’ll learn about the most powerful type of research that you can do. You can even find your own judge’s previous responses to the arguments – right at your own court.
You will hear about law library research – its advantages and disadvantages.
And you will see how to do legal research on the computer wherever there is an internet connection. How to do it and what to look for, but also some warnings about using this seemingly convenient and obvious.choice.
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