Special Issue: Can Debt Collectors Garnish My Social Security?

If you are an elderly or disabled American—or are receiving Social Security Payments for any other reason—you may fear that debt collectors could seize or garnish your income. The debt collectors may have suggested they could, or would do so if you do not pay them. Can they do it?

Read the Whole Answer!

If you are dependent upon Social Security in any way you must read this entire article. You must read on beyond the simple answer because a little knowledge can be a dangerous thing—and it is specially dangerous here. The real answer is 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. 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

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 without providing any notice of that fact to the debtor.

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 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 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. The debt collectors were garnishing the bank accounts of the elderly whose accounts were undeniably largely—and often exclusively–made up of Social Security payments. During the litigation to untangle the amounts of garnishable versus ungarnishable amounts, the elderly were facing homelessness and other deprivations. Some of them died, and hundreds of thousands or millions were subjected to extreme hardship and crisis.

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, http://www.masterjules.net/takessi.htm. If you read the Rowley article, you will notice that 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, and of course this is the way the debt collectors knew where their bank accounts were. Do not make that mistake: do not allow the debt collectors to know where your money is.

In New York, landmark legislation is now protecting the elderly. See, http://www.sbls.org/index.php?pg=2&s=spotlight&c=SSIDisability-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.

A Possible Solution You Need to 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 which is exclusively funded by Social Security or other exempt payments, and the other which is not. Notify the bank receiving Social Security payments that the account consists exclusively of Social Security payments. I would 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 turn it into a postal money order rather than send a check. A still safer approach is to make all payments with money orders.

These actions may not completely eliminate the risk, but they go a long way towards protecting you from some of the worst consequences of debt collector damage.


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