Consumer advisory: Your benefits are protected from garnishment

Older Americans, like many of their younger counterparts, increasingly have debts in collection. Over one-third of the complaints that older consumers submit to us are related to debt collection. In some of these complaints, consumers told us that debt collectors threatened to garnish their benefits from Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI), and VA benefits, even though these funds usually can’t be garnished.

Garnishment can happen after a collector wins a lawsuit against you for a debt. A collector can then ask your bank or credit union to turn over money in your account to pay the debt.

According to the complaints we reviewed, threats to garnish these benefits cause older consumers and veterans significant distress, especially when they depend on this income to pay essential living costs. We’ve created a sample letter to help consumers tell debt collectors that their income is protected from garnishment.

We also explain how Social Security and VA benefits are protected in Ask CFPB. Here’s a preview:

Automatic protections for Social Security and VA benefits

If you receive Social Security or VA benefits by direct deposit, then your bank must protect 2 months’ worth of benefits in your account. This means you can continue using that money.

For example, if you receive $1,000 in Social Security each month, your bank will see that $2,000 in Social Security was direct deposited in the last two months. The bank must allow you to continue using up to $2,000 in the account. However, if you have $3,000 in your account, the bank can freeze $1,000 of the $3,000. It must give you access to the remaining $2,000 so you can continue to pay bills and withdraw cash as usual.

What happens if any of your money is frozen

If any of your money is frozen, your bank must send you a notice of garnishment. Then, a judge decides whether the amount that was frozen should be turned over to the debt collector based on factors such as the source of your income and state law. Seek help from a lawyer to alert the judge that your income is protected. If you can’t afford a lawyer, you may be eligible for free legal help.

Automatic protections for benefits on a prepaid card

Many people receive Social Security or VA benefits on a prepaid card. If your benefits are loaded onto a Direct Express prepaid card or into another prepaid account, they are still automatically protected from garnishment, just like money in a bank account.

Exceptions

Social Security and SSDI can be garnished to pay government debts such as back taxes or federal student loans, and debts for child or spousal support. Some other means-tested benefits, such as SSI, are protected from garnishment – even to pay a government debt or child or spousal support.

Learn more

To learn more, visit Ask CFPB. You can also download a printer-friendly version of this information to share with friends or clients.

If you have had a problem with debt collection, you can submit a complaint online or by calling (855) 411-2372.