Social Security Disability Insurance (SSDI) is a lifesaver for many disabled people. It is also the only source of income for many people all over the United States. Thus, it’s only natural to wonder whether SSDI can be garnished, such as in a lawsuit.
You’ll be glad to know that SSDI benefits cannot be garnished in a lawsuit. This is because these benefits are protected by the law. However, there are other instances where SSDI benefits can be garnished.
Read below as we describe SSDI benefits and when they can be garnished.
SSDI Overview
When an eligible worker is disabled and unable to work, the Social Security Administration will give them benefits under the Social Security Disability Insurance program.
Your age, as well as the amount of time you have contributed to Social Security, determine whether or not you are eligible for SSDI payments. Your pre-disability income will determine how much money you receive in disability payments.
The Social Security Administration pays SSDI, but also retirement, survivorship, and supplemental income. Depending on your situation and needs, you may be eligible for Supplemental Security Income (SSI) in addition to your SSDI.
All forms of Social Security benefits are subject to the same garnishment and levy regulations. However, recipients of SSI benefits enjoy certain extra safety measures.
What is SSDI Garnishment?
Garnishment is a legal procedure that allows a creditor to collect an outstanding debt. Debtors are those who owe money to others, whereas creditors are those who are owed money by debtors.
A creditor has the right to file a lawsuit against a debtor who fails to make payments. Creditors can get a judgment if they win their lawsuit. A judgment is a court order that officially establishes the amount of money a debtor must pay to a creditor.
Once a creditor has successfully filed a lawsuit against a debtor and obtained a judgment against the debtor, the creditor is then able to request the court to have the debtor’s bank account garnished.
The bank then has the legal obligation to transfer the funds from the account to the debtor. However, the legislation prohibits the garnishment of certain debtors’ accounts. In other words, creditors may not always be able to take money out of a debtor’s bank account.
Can SSDI Be Garnished in a Lawsuit?
Many people are living off of Social Security Disability Insurance and have judgments against them because of unpaid bills from the past, such as credit cards and medical expenses.
A creditor’s typical collection options after obtaining a judgment include income and bank account garnishment, as well as seizure (sometimes called levy) of property. However, the law provides more protection for their Social Security payments.
After receiving a garnishment notice, banks are required to look back at the account’s activity for the prior two months to see if any benefit payments were deposited. If the money is exempt from garnishment, the bank is required to let you know within two business days of receiving the garnishment notice.
If it can be proven that the funds are benefits from Social Security, the bank is not allowed to freeze them. You have to be allowed what’s called “full and customary access” to the money. Additionally, the bank will not be able to deduct a garnishment fee from the funds that have been protected.
Judgment creditors can still try to collect by seizing assets, even if they can’t garnish bank accounts. In addition, the majority of judgments become a lien against your property, which means that you won’t be able to sell it or borrow money against it until you settle the debt associated with the judgment. You need to consult a competent attorney as soon as possible after being sued. It is never a smart idea to ignore the lawsuit that is being filed against you.
When Can SSDI Be Garnished?
The Social Security Administration allows garnishment of benefits in the following situations:
- Overdue Tax Payments: The United States Treasury Department may withhold up to fifteen percent (15%) of your total benefit amount.
- Past-Due Alimony or Child Support: State laws vary, but generally, a garnishment is not permitted for more than 60% of your benefits total (65% if payments are due for over 12 weeks or more).
- Unpaid Criminal Restitution: State rules determine the exact percentage of benefits that can be garnished, but it usually falls under 25%.
- Due Payments to Federal Departments and Agencies: All federally funded student loans are included in this. The percentage of your benefit that is garnished might be as much as 15% of the total, so long as the amount that you are still entitled to receive is at least $750.
You must show proof that Social Security Disability Insurance or Supplemental Security Income is your only source of income if you receive a garnishment notice. To prove this, you can produce proof of deposit, such as a bank statement confirming that your SSDI or SSI payment came from the Social Security Administration.
You may have to go to court to challenge the garnishment, and before you do, it’s wise to have an attorney review your case.
Some financial institutions ignore the law that requires them to confirm the origin of the funds before disbursing a garnishment, which means that your benefits may be withheld temporarily while you seek a restitution order from the court.
Once a person’s application for benefits has been authorized, an experienced lawyer can help them protect those benefits. This may involve ensuring that the applicant continues to get necessary medical treatment or pursuing the recovery of money that was unlawfully garnished.
How Can I Tell if My Account Can Be Garnished?
Legally, creditors do not have the right to seize some assets. The term “exempt” refers to any property that cannot be taken in accordance with the law to satisfy a debt. Accounts that contain only exempt funds are immune to garnishment.
The exemption applies to your Social Security benefits. Therefore, the majority of creditors will not be able to garnish your Social Security check, provided it is the only money that is being deposited into your bank account.
If Social Security is the sole source of income you receive each month and you are concerned about garnishment, you might consider sending a letter to the bank requesting that it not garnish any of your money.
If you receive your Social Security benefits via direct deposit to your bank account, The bank is required by law to review your account activity every two months and release any exempted funds to you.
The bank is obligated to safeguard the entire exempt amount, regardless of whether or not it is segregated from other funds in the account. It also makes no difference if the account is jointly owned or not. However, it is recommended that you set aside your Social Security funds in a separate account.
How to Protect SSDI Benefits from Bank Levies
SSDI payments are exempt from garnishments and levies on bank accounts in many different circumstances. These safeguards can sometimes be implemented automatically.
On other occasions, though, you will need to take proactive measures to prevent a bank from freezing your financial resources. Further, your Social Security Disability Insurance (SSDI) payments may be subject to levy in certain circumstances.
Automatic Safeguards
A Treasury Department rule states that a bank cannot take money out of your account without first verifying that no Social Security benefits have been placed there within the previous two months.
If Social Security benefits have been received, the bank needs to calculate the “protected amount.” If you have received any government benefits in the preceding two months, the bank must add up all of those deposits and subtract them from the total balance.
State Laws
Even if the benefits in your account don’t meet the requirements of the automatic protection law, they may be free from creditors under the laws of the state in which you reside. Every state has a statute that protects certain assets from garnishment or levy. When receiving SSDI benefits, most states provide some measure of security through exemption laws.
Not everyone is automatically safe under state law protections. You must respond swiftly if you receive a bank levy notification and believe that your bank account holds exempt benefits. You’ll need proof that the funds in your account are exempt under the laws of your state.
It is a recommended practice to keep your SSDI funds apart from your general finances. It is far simpler to show that all the funds in a chosen account are eligible for protection because of the account’s specific designation.
When Can A Bank Levy My SSDI Benefits?
There are some debts that can be levied against your SSDI payments, regardless of whether you live in a state with exemption legislation or the automatic protection rule.
These include payments for child support or alimony, payments that are overdue for criminal restitution, and any other outstanding debts owed to federal authorities. Back taxes are also included in this category.
Conclusion
In conclusion, SSDI benefits can’t be garnished in a lawsuit, but some debts can still be levied against your SSDI payments. Most SSDI beneficiaries can rest easier with these protections without having to worry about what they’ll do if they have to let go of their sole means of income.
