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Can Banks Take Social Security Benefits to Pay Debts?

If you owe money for an old debt, such as child support, federal taxes, a judgement, or even a credit card and you receive Social Security payments, you may be wondering if your banking institution can take that money to pay your outstanding debt. This is a good question.

As a general rule, Supplemental Security Income (SSI) is protected by federal law, so if your SSI income is deposited directly into your bank account, a creditor who has gotten a judgement cannot execute it against your bank account to satisfy its claim, however, there are exceptions.

Other Social Security Benefits

If you’re receiving Social Security Disability (SSDI) benefits, or if you’re receiving Social Security retirement benefits, then your account is not entirely protected by federal law. The following types of claims can be satisfied with this money:

  • Taxes
  • Child support
  • Student loans
  • Other money owed to the government

Safeguarding Social Security Funds

As of May 1, 2011, the U.S. Treasury required that banks take certain steps to safeguard Social Security funds, Veteran’s benefits, and Federal Employee Retirement System benefits among others.

Essentially, whenever the federal government inserts what is called an “electronic tag,” in all direct deposits of exempted payments, the banking institution must follow these procedures:

  • When a bank receives a garnishment order from the court, it has two business days to review the account and determine if the money is exempt from seizure. If so, those funds cannot be frozen or garnished.
  • All tagged deposits made two months prior to the garnishment order are protected from garnishment.
  • The bank has three business days from receiving the garnishment order to give the customer the date of garnishment, the creditor’s name, and the protected and non-protected assets in the account.

Note: Despite the 2011 changes, Social Security payments can still be garnished for child support or federal taxes. As always, if you’re concerned about your Social Security Disability payments being garnished to pay an old debt, you want to take action to protect them.

The best way to understand how an old debt may affect your Social Security payments, is to discuss the details with an attorney from our firm.

Consult with a Dallas Social Security Disability attorney from The Zendeh Del Law Firm to protect your rights. Call today to set up your initial case evaluation!