New rule makes Social Security benefits off-limits for garnishing

Monday, March 25th, 2013 By

Social Security card

Social Security benefits are becoming more difficult to garnish under new government regulations. Image from Wikimedia Commons.

A newly enacted law makes it more difficult for debtors to garnish Social Security benefits. Banks cannot garnish any benefit payments like Social Security or disability unless there are two months of benefit payments, which is not incredibly likely to happen. However, the new rule only applies to banks.

Government benefits under new protections

The Department of the Treasury and other government agencies have changed a key rule concerning debt collection and recipients of federal benefits including Social Security, disability or other federal benefit payments, according to CNN. Banks are prevent from garnishing or taking money out of the accounts of people who are recipients of government benefit payments, unless the account has at least two months of benefits sitting in it. However, since many people who depend on government benefits do not always have that much in savings, that means that withdrawing funds for overdraft or other account fees may become a bit more tricky. Bank fees, including checking account fees and overdraft fees, have not been decreasing with the recession in the slightest, according to WalletPop, and Americans are expected to pay at least $38 billion in fees for 2011.

Slight change for creditors

Creditors, on the other hand, can still garnish government benefits. However, the rule for creditors changed slightly. Any creditor has to obtain a court judgement which allows them to garnish income before they can start extracting payments for past due balances. Whomever someone owes for credit cards, same day loans or installment loans, the creditor has to get the go-ahead from a court to do it. Before the funds can be accessed, though, a creditor has to determine which funds technically came from government benefits, whereas they previously did not have to. Government, on the other hand, can garnish anyone’s benefit payments if that person owes the government money.

Social Security checks phasing out

Soon, Social Security checks will be an anachronism, as the Social Security Administration is phasing out paper checks in favor of direct deposit, according to USA Today. For those recipients that don’t have bank accounts, the SSA will furnish them with a prepaid debit card in a partnership with Comerica bank. Currently, about 85 percent of Social Security recipients already receive their benefits through direct deposit. Each direct deposit transaction costs the federal government about 10 cents to complete. Each paper check written out and mailed costs about $1. The government issues about 120 million checks every year, and switching to a paperless system will save taxpayers over $100 million per year.




USA Today

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  1. hazel says:

    great post. thanks for the links of resources

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