Can Creditors Garnish Your Social Security Disability Benefits?

Your Social Security Disability Insurance check hits your account every month, and it might be the only money keeping you afloat. A credit card company just threatened to sue you. Can they take your SSDI?

The short answer: probably not. SSDI benefits carry federal protection from private creditors. Credit card companies, medical bill collectors, and personal loan holders can't touch that money. But there are holes in the shield.

When SSDI Is Untouchable

Federal law blocks private creditors from garnishing Social Security Disability Income. That protection covers:

• Credit card debt
• Medical bills
• Personal loans
• Payday loans
• Auto loans (after repossession)
• Utility bills
• Collections on any consumer debt

If your only income is SSDI, you're functionally judgment-proof. A creditor can sue you, win in court, and get a judgment. But when they try to collect, there's nothing they can legally seize.

This doesn't mean the debt disappears. Interest keeps accruing. The judgment stays on your credit report for seven years. If your financial situation changes—you inherit money, start working part-time, receive a settlement,creditors can come back.

When SSDI Can Be Garnished

Four types of debt override federal protection:

1. Child Support and Alimony

Family courts can garnish up to 50% of your SSDI if you're supporting another child or spouse. That jumps to 60% if you're not. Add 5% if you're more than 12 weeks behind.

2. Federal Student Loans

The Department of Education can take 15% of your monthly SSDI through administrative garnishment. No lawsuit required. They must leave you at least $750 per month, but that's the only limit.

3. Federal Taxes

The IRS uses a 15% continuous levy on SSDI for unpaid taxes. They calculate it differently than other garnishments, and the exemption amounts are lower.

4. Court-Ordered Restitution

If you owe restitution as part of a criminal sentence, the government can garnish your benefits. This is rare but absolute.

SSI Gets Stronger Protection

Supplemental Security Income has an extra layer of defense. Even the four exceptions above don't apply to SSI. Nothing can be garnished from SSI,not child support, not federal student loans, not the IRS.

If you receive both SSDI and SSI, keep them in separate accounts. Creditors who can garnish SSDI shouldn't be able to touch your SSI, but commingled funds make enforcement messy.

How to Protect Your SSDI From Bank Levies

Bank account garnishments work differently than wage garnishments. A creditor with a judgment can ask the court to freeze your bank account and pull money directly. Here's how to block them:

Use Direct Deposit

Banks must identify and protect federal benefit payments that arrive via direct deposit. When a levy hits, your bank reviews deposits from the past two months. Any money clearly marked as Social Security gets automatic protection.

If you deposit paper checks yourself, you lose that automatic shield. The bank won't know the money came from SSDI. You'll have to file paperwork proving the funds are exempt, and that takes time you might not have.

Keep SSDI Separate

Open a checking account that only receives your disability benefits. Don't deposit paychecks, tax refunds, gifts, or any other money into that account. If you mix protected and unprotected funds, creditors can argue the entire balance is fair game.

Use a second account for other income. Transfer what you need for bills. Keep the SSDI account clean.

Document Everything

Save your Social Security award letter. Keep three months of bank statements showing only SSDI deposits. If a creditor freezes your account anyway, you'll need proof fast. Courts can release frozen SSDI, but you have to show it's exempt.

Can Creditors Still Sue You?

Yes. Being judgment-proof doesn't stop lawsuits. A credit card company doesn't know your financial details until after they sue. They'll file the case, serve you papers, and try to get a judgment.

You still have to respond. If you ignore the lawsuit, the court enters a default judgment. That judgment is valid for years. If your income ever changes, the creditor can execute it immediately.

Show up to court or file a written response. Tell the judge your only income is SSDI. In some states, the judge will dismiss the case once they see you're judgment-proof. In others, the creditor gets their judgment but can't collect.

Either way, your benefits stay protected.

What to Do When Debt Collectors Call

Being judgment-proof doesn't stop collection calls. Debt collectors will still harass you. You can shut them down:

Send a Cease Contact Letter

The Fair Debt Collection Practices Act lets you stop collection calls with a written request. Send a letter stating:

• Your only income is Social Security Disability
• You have no non-exempt assets
• You're judgment-proof
• They must stop contacting you

Send it certified mail with a return receipt. Once they receive it, calls must stop. If they continue, you can sue them for FDCPA violations.

This doesn't erase the debt. It just ends the harassment.

Don't Make Promises You Can't Keep

Collectors will ask for $10 a month. They'll say small payments show good faith. Don't agree. Any payment resets the statute of limitations on that debt. You're giving old debt new life.

If you can't pay in full, don't pay at all. Let the statute of limitations run out. In most states, that's three to six years from your last payment.

When Bankruptcy Makes Sense

If you're living on SSDI and drowning in debt you can't pay, bankruptcy offers a permanent solution. Chapter 7 wipes out credit cards, medical bills, personal loans, and old utility bills in about four months.

You might think bankruptcy isn't worth it if you're already judgment-proof. Here's why it matters:

• Stops collection calls forever. A discharge is stronger than a cease letter. Creditors can never contact you about discharged debts again.
• Clears your credit report faster. A bankruptcy falls off after seven years. Unpaid judgments can stick for longer in some states, and creditors can renew them.
• Removes the threat. If your situation improves,you get a part-time job, receive an inheritance, sell property,creditors can't touch it. The debt is gone.
• Protects your family. If you die with unpaid judgments, creditors can file claims against your estate. A bankruptcy discharge ends that risk.

SSDI counts as income for bankruptcy purposes, but it's usually low enough to qualify for Chapter 7. Most states exempt Social Security from the bankruptcy estate, so you keep every dollar.

You can file bankruptcy without a lawyer using free tools that walk you through the paperwork. If your case is simple,no assets, only SSDI income, mostly credit card debt,you can handle it yourself.

What Happens to Your Credit?

If you're living on disability with no plans to work again, your credit score matters less. You're not applying for mortgages or car loans. But your score affects:

• Security deposits for apartments (landlords pull credit)
• Utility deposits (electric and gas companies check credit)
• Cell phone plans (carriers charge more for bad credit)
• Insurance rates (many states let insurers use credit scores)

Unpaid debts and judgments drag your score down for years. Bankruptcy drops it initially but lets you rebuild faster. Most people who file bankruptcy while judgment-proof see their scores recover within two years.

State-Specific Protections

Federal law protects Social Security from garnishment, but state laws control bank account exemptions. Some states add extra shields:

Texas and Florida protect 100% of disability income deposited in bank accounts, even if it's mixed with other funds.

California requires creditors to prove funds aren't exempt before levying an account.

New York exempts the minimum necessary to meet reasonable living expenses, which often covers SSDI.

Check your state's exemption laws. If you're sued, mention these protections in your response.

When You Go Back to Work

If you start earning wages while receiving SSDI, you lose judgment-proof status. Social Security allows trial work periods,you can earn up to $1,050 per month (2024 limit) without losing benefits. But those wages aren't protected from garnishment.

Once you earn above the substantial gainful activity threshold ($1,550 per month in 2024), your SSDI benefits stop. At that point, creditors can garnish your wages for any outstanding judgments.

If you're considering going back to work and have old debts, filing bankruptcy before you start earning clears the slate. You won't face garnishments once you're working again.

Veterans Benefits Work the Same Way

VA disability compensation has identical protections to SSDI. Private creditors can't touch it. The same four exceptions apply: child support, alimony, federal student loans, and federal taxes.

Veterans benefits also get the two-month lookback protection in bank accounts if you use direct deposit. Keep VA payments in a separate account from other income.