If you're worried about debt collectors taking your disability benefits, you should know that strong protections exist. Here's what you need to know.
In this article, we'll cover:
- Protections for disability benefits
- When benefits can be garnished
- Protecting your money in the bank
- Dealing with debt collectors
1. Protections for Disability Benefits
SSI is protected:
- Cannot be garnished by creditors
- Protected from most seizure
- Only very limited exceptions
- Strong legal protection
SSDI is protected:
- Cannot be garnished by most creditors
- Protected from private debt collection
- Some federal exceptions
- Similar strong protection
Federal law protection:
- Section 207 of Social Security Act
- Protects benefits from garnishment
- Applies to both SSI and SSDI
- Powerful protection
What's protected:
- Your monthly benefit payment
- Direct deposits of benefits
- Money that came from benefits
- Up to 2 months of deposited benefits
2. When Benefits CAN Be Garnished
Federal obligations:
- Federal taxes owed
- Federal student loans in default
- Child support
- Alimony
- Certain federal debts
Limits on federal garnishment:
- SSDI: Up to 15% for federal debt
- Child support: Up to 50-65%
- Federal taxes: Partial garnishment allowed
- SSI: Generally still protected
What CAN'T garnish:
- Credit card debt
- Medical bills
- Private loans
- Most state debts
- Civil judgments
Important distinction:
- Most personal debts cannot garnish
- Only specific federal obligations
- SSI has strongest protection
- Know your rights
Important: Regular creditors (credit cards, medical bills, personal loans) cannot garnish your SSI or SSDI benefits.
3. Protecting Your Money in the Bank
The 2-month rule:
- First 2 months of benefits in bank protected
- Automatic protection
- Bank must recognize
- Beyond 2 months may be at risk
Commingled funds:
- If you mix benefits with other money
- Harder to identify protected funds
- Keep benefits separate if possible
- Makes protection clearer
Bank responsibility:
- Banks must protect benefit deposits
- Look for federal benefit payments
- Required by law
- But you may need to assert rights
If bank freezes account:
- They must review for protected benefits
- Identify benefit deposits
- Release protected funds
- You may need to notify them
4. Dealing with Debt Collectors
Know your rights:
- Benefits are protected
- Tell collectors your only income is protected
- They may continue trying
- But can't legally garnish
What to say:
- "My only income is SSI/SSDI"
- "These benefits are protected from garnishment"
- "I request you stop contacting me"
- Put in writing
Document everything:
- Keep records of collection attempts
- Note dates and what was said
- Save letters
- Important if problems arise
If sued:
- Benefits still protected
- May still get judgment against you
- But enforcement limited
- Consider consulting attorney
Statute of limitations:
- Old debts may be past statute
- Varies by state and debt type
- Collection may be unenforceable
- Research your situation
Protecting Yourself
Keep benefits separate:
- Dedicated account for benefits
- Don't mix with other income
- Easier to identify protected funds
- Better protection
Know your bank:
- Understand their policies
- How they handle garnishment orders
- Educate them about your benefits
- Be proactive
Consider legal help:
- If collectors are aggressive
- If bank isn't protecting funds
- Free legal aid may help
- Know your resources
How Purple Helps
Purple protects your benefits:
- Dedicated benefits account
- Clear benefit tracking
- Protected funds easily identified
- Simple banking
- Less financial stress