Can Private Disability Payments Be Garnished?
Social Security disability benefits are fully protected from garnishment by federal law. Private disability payments are not protected and can be garnished up to 25 percent. Keep exempt income in separate accounts and respond promptly to debt lawsuits to protect your funds.
Answer the LawsuitDebt collectors have many ways to collect what you owe. Wage garnishment is a common result when judgments go against you. If you receive disability benefits, you need to know what’s protected.
Social Security disability benefits are protected from garnishment. Private disability payments are not. You need to understand the difference and take steps to protect your income.
Protect Your Disability Payments From Garnishment
Being sued for debt? Respond to the lawsuit before the deadline and raise exemption defenses. Act now to protect your private disability income from garnishment.
File Your ResponseHow Creditors Use Garnishment to Collect Debts
When a creditor sues you and wins, they get a judgment. The judgment gives them authority to pursue garnishment to collect the debt.
Each state has different rules for garnishment. The rules cover the percent, amount, and type of funds that can be garnished.
A clerk or sheriff typically issues a writ of garnishment. Your employer or income source receives the writ. If you don’t appeal, funds go directly to the creditor.
Our partner Solo can help you respond to debt collectors and protect your funds.
Federal Rules Protect Some Income From Garnishment
Federal law exempts Social Security and disability benefits from garnishment or bank levy. The Social Security Administration won’t garnish funds from its own payments.
Private disability checks may be subject to garnishment. Protection varies by state. You need to check your state’s specific laws.
The Consumer Credit Protection Act sets nationwide limits on garnishment. Creditors can take up to 25 percent of disposable earnings. They can also take the amount by which earnings exceed 30 times minimum wage.
Whichever amount is less becomes the limit. Private disability benefits count as earnings under this law.
Important Exceptions to Federal Garnishment Protection
Some creditors can garnish protected income. Child support collection agencies and the federal government have special powers.
The IRS can garnish your Social Security disability payments. Tax garnishments are limited to 15 percent of total payment. Student loan garnishments follow the same 15 percent limit.
Other government creditors cannot touch the first $750 of monthly disability benefits. Amounts above $750 may be subject to garnishment.
Supplemental Security Income Gets Full Protection
Supplemental Security Income provides monthly benefits to disabled individuals. The program serves people with limited income and assets.
Federal law completely bars garnishment on SSI benefits. Creditors cannot touch SSI payments at all. These funds are fully protected because they serve those with little money.
Bank Levies Work Differently Than Wage Garnishment
Losing a debt lawsuit can lead to a bank levy. A bank levy differs from wage garnishment.
With wage garnishment, money comes from your paycheck. With a bank levy, money comes from your bank account. Funds transfer to the creditor until the debt is satisfied.
Federal Law Protects These Funds From Bank Levies
Several types of payments are exempt from bank levies:
- Social Security benefits
- Federal veterans benefits
- Supplemental Security Income payments
- Child support
- Alimony payments
- Unemployment compensation
- Welfare benefits
You must tell your bank the source of these funds. Banks have no obligation to identify fund sources on their own.
If you mix exempt funds with non-exempt funds, protection gets complicated. Banks can transfer any funds in your account to the creditor. They don’t need to notify you before the transfer happens.
Retirement Accounts Have Special Protection
Checking and savings accounts face bank levy risk. Retirement accounts have stronger protection.
The Federal Employee Retirement Income Security Act protects retirement accounts. Employers set up ERISA accounts. Beneficiaries cannot lose their right to these assets through garnishment.
How to Protect Your Private Disability Payments
Keep exempt income in a separate bank account. Don’t mix protected funds with regular income. Your bank needs clear documentation of fund sources.
Notify your bank immediately when exempt funds are deposited. Provide proof that funds come from protected sources. Keep all documentation of benefit payments and sources.
If you’re being sued for debt, respond to the lawsuit promptly. Our partner Solo helps you file a response and raise exemption defenses.
Responding to Debt Collection Lawsuits
You must respond to debt collection lawsuits within your state’s deadline. Missing the deadline means an automatic judgment against you.
Your response should include all applicable defenses. Income exemptions are important defenses to raise. You can explain which income sources are protected from garnishment.
Acting quickly protects your rights and your funds. You have options even after receiving a summons or complaint.