I am often asked by clients if their disability benefits can be taken to pay old debts. Filing for Social Security disability benefits is a lengthy process, and many people accrue significant debt during the application process. These people are worried that their benefits will be taken from them in order to satisfy these debts. However, most people have nothing to fear, as Social Security disability benefits can only be garnished in certain circumstances.
If you owe money to the federal government (for example, unpaid taxes or past-due student loans from the Department of Education) the government has the power to take your Social Security disability benefits in order to satisfy the debt. Your benefits can also be garnished if you are in arrears in child support or alimony, or if you have been ordered by a court to pay restitution.
Generally, these are the only circumstances in which your Social Security disability benefits can be taken to pay old debts. If you have other debts, such as private loans or credit card debt, your Social Security disability benefits cannot be garnished as long as the benefits are not “intermingled” with other assets. Therefore, you should keep your Social Security disability benefits in a separate bank account. If your disability benefits are combined with other money you may have, the benefits are subject to garnishment. Once you are awarded disability benefits, you should consider setting up a separate bank account just for your benefits to make sure that those benefits cannot be garnished.
However, some creditors and even banks aren’t aware of the fact that Social Security disability benefits cannot be garnished. If your disability benefits (which have not been intermingled with other assets) are garnished, inform the creditor and the bank immediately that the garnishment violates Section 207 of the Social Security Act. Section 207 protects your benefits even after they have been paid to you as long as the money can be identified as being Social Security benefits – that’s why you cannot intermingle the benefits with other money you may have.
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