Creditors And Your Social Security Disability Benefits

Creditors And Your Social Security Disability Benefits


Dealing with creditors can be stressful, especially if you are on a limited income.  Creditors may sue a debtor and receive a judgment against him or her, with a court order to get the owed money directly from the debtor’s bank account through garnishment.  When a debtor is receiving Social Security Disability benefits, the thought of garnishment can be frightful considering the amount received may be very little and cover needed expenses.  Luckily, Social Security Disability benefits are generally protected from private creditors.

If the Social Security Disability benefits are directly deposited into a bank account that is subject to an order of garnishment, the bank is not allowed to give the creditor access to up to two months of benefits deposits.  These two months of deposits are protected from the creditor and available to the debtor to use as he or she desires to use them, without restrictions.  However, if the bank account contains additional funds, the bank freezes the additional funds until a court can decide if the creditor can access the money or if the creditor is prohibited from doing so under state or federal law.  When funds are frozen, not even the bank account owner has access to them.  Note that for benefits recipients who receive paper checks and deposit them into their bank accounts, the bank would freeze the entire amount without excluding two months’ worth of benefits.

There are some debts for which Social Security Disability benefits may be garnished, these include: federal taxes owed to the IRS, federal student loans, child support, and alimony or spousal support.  If a person receiving benefits also owes on these kinds of debts, the amount owed is taken out before the benefits are distributed.  When benefits are garnished in this manner, the first 750 dollars in benefits may generally not be taken and garnishment only applies to amounts over this, with the exception of tax debt.  The IRS can take 15 percent of a person’s benefits to pay tax debts regardless of the amount of benefits the person receives.

Banks typically notify their customers when they freeze accounts.  If you learn that your bank has frozen your account because of a garnishment, you should take steps to go to court and ask for the bank to unfreeze your account.  You may try to communicate to the bank that the garnishment does not apply to the money in the account because it is exempted; however, the bank is unlikely to unfreeze the account without a court order.  While these issues are being resolved, you may want to stop all outstanding check issued on your account to avoid bank fees.

Contact an Attorney

If you have a medical condition that keeps you from working, you may be able to qualify for Social Security Disability benefits.  These benefits can assist you in paying your monthly bills and meeting the costs of your daily living.  Contact the experienced social security disability attorneys of the Law Offices of Kenneth Hiller, PLLC to discuss eligibility and how you can apply for benefits.