Social Security Benefits, Bank Account Levy and Bankruptcy
One of the areas of law that generates a lot of questions to me in the form of emails, blog post comments and phone calls relates to Social Security benefits. Can they be seized by a judgment creditor? by a student loan creditor? are Social Security benefits protected in bankruptcy? Here is my understanding of the law. I will update this page as I consolidate my knowledge. I invite corrections and requests for clarifications from readers, especially my fellow lawyers. This blog post does not, of course, constitute legal advice and you should seek counsel in your jurisdiction for answers to specific questions about your case.
Section 207 of the Social Security Act (42 U.S.C. Section 407) provides as follows:
- The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.
- No other provision of law, enacted before, on, or after the date of the enactment of this section may be construed to limit, supersede, or otherwise modify the provisions of this section except to the extent that it does so by express reference to this section.
- Nothing in this section shall be construed to prohibit withholding taxes from any benefit under this title, if such withholding is done pursuant to a request made in accordance with section 3402(p)(1) of the Internal Revenue Code of 1986 by the person entitled to such benefit or such person’s representative payee.
Garnishment/Levy
I read Section 207 to mean that a judgment creditor (i.e. a credit card lender) cannot seize funds directly from Social Security or from a bank account that came from Social Security payments.
Possible exceptions:
- Child support
- Student Loans
- Past due tax debt
- Overpayment of benefits by Social Security
- Debts owed to other federal agencies
Potential problem areas
- Accounts containing co-mingled funds
- Differences in treatment of Social Security disability and Social Security retirement
- Effect of voluntary transfer of Social Security payments pursuant to a divorce decree
- Difference in treatment of SSDI and SSI payments
Bankruptcy
Bankruptcy “exemptions” cover which assets may be sheltered as part of a bankruptcy filing. The applicable exemption law that applies in your case depends on your current residence, but could relate back to a former residence if you recently moved across state lines. Long-time residents of Georgia will be subject to the exemption law that is contained in the Official Code of Georgia. I read the Georgia exemption statute as sheltering your right to receive future Social Security benefits, and protecting already received benefits to the extent reasonably necessary to provide support and maintenance to the debtor or any dependant of the debtor.
Potential problem areas
- Lump sum Social Security benefits received prior to filing bankruptcy that have been sitting in your bank account (see discussion of Carpenter case)
- Lump sum Social Security benefits (representing past-due payments from prior months) that come into your bankruptcy estate after you file
- Differences in treatment of Social Security disability and Social Security retirement
- Social Security benefits (on-going or already received lump sum) that were voluntarily transferred from the claimant to an ex-spouse or child as part of a divorce settlement
{ 52 comments… read them below or add one }
I became totally disabled in September, 2006 and after an almost 2 1/2 year battle with Social Security I was finally approved for disability benefits after appealing my case to a Federal reviewing judge in Boston, Ma. The judge approved my case in December, 2008. In February, 2009 I received my past due benefits and began to receive my SSDI monthly payment.
In mid-February, I was served (well, not exactly served, it was left in my front door) with what I believe is a summons that I am supposed to reply to within 20 days to the plaintiff’s (Capital One Bank) attorney and also a copy to the district court. First off, I am not comfortable replying to this piece of paper because I do not agree with all the things that it says such as the amount I supposedly owe on this credit card and also the fact that they (Capital One) want me to agree that I will pay their attorney’s fees.
When I left work in September, 2006 until my first check from Social Security came in February, 2009 I had no income and my husband and I have been living to the best of our ability on his Social Security payment.
My question to you is, do you know if this lawyer or the court can levy my Social Security check or my bank account that my Social Security Check is direct deposited to? All of the money that is in this account is money that has been deposited by Social Security and/or SSI. I have received different answers from different people in regards to this matter. I have been told that they cannot levy my SSDI check or my bank account because all of the money in the account are Social Security payments. Somebody else told me that they cannot levy my SSDI check but once Social Security makes my deposit on the 3rd of the month that it is fair game and they can then levy the bank account even though it came from Social Security and it is all the income that I have to live on each month.
I am trying to find out what the correct answer to this is. Is Social Security payments and bank accounts that receive deposits only from Social Security free from liens and levies or are they not safe?
Any information that you could supply would be deeply appreciated. At this point I feel as though I am going to have a nervous breakdown because I am so worried about waking up and finding that they have taken what Social Security money I do have in my account.
Thank you very much for your help.
Can I put my social security checks on hold and not have to declare that as income for filing chapter 7. Then when I am finished with the bankruptcy proceedings start them up again
I have just went through this exact scenario.
The protections from creditors to garnish Social Security (Social Security Act Sect. 207) extend to amounts in accounts into which only Social Security is deposited and verifable as Social Security payments under “normal banking practices” to quote the social security site. However, a creditor can still attempt to garnish the account and if it does, at least here in Ohio you will need to request a hearing to get your money back. Unfortunately too at least my bank will not challenge the order and to boot charges a 75.00 fee for every attempt that occurs.
Hope it helps
my husband passed away and I owe a funeral bill.My son was the co signer.The bill was in illinois and I live and did live in tennessee when my husband died but had him taken home for burial.My insurance did not pay off so I have been left with this burden.They were suppose to send me a payment plan but, never did.They never send me a notice to pay before collection of the debt yhey turned it over to a lawyer and the lawyer never sent me anything to try and collect the debt either He took it straight to small claims court.He sent my son a summons in illinois with my name and my sons name to appear in court.I made a trip to illinois from tennessee so I could appear.When the court called my name and my sons I went forth and then the lawyer told the judge he wanted the court and him to know I was not summons Iwas there because I just wanted to be there.So, they took it to a bench trail.So, I didnot apear.there he got a judgement on my son and he ask the judge if he could add me to that judgement because I did not appear. But he said I was not summons How is that legal?
I have been trying to find the statute of limitations when a bank places a hold on a account that receives only SS and VA disability benefits.
My bank account was overdrawn by more than 1200 dollars about two years ago. Most of the amount was due to overdraft fees. The bank emptied my savings account applying the amount of the overdraft protection fee for such.
However, my student loan was deposited first and this put my account in the black. When I went to withdraw funds for living expenses I was told by the clerk that my account was on hold.
I called the bank and spoke to whomever and was told that the manager would be informed and the hold would be lifted.
Three days later my account was still on hold. I called and spoke with the manager. With a humorous response, to my request to have the hold on my account lifted: it was finally activated.
This affected my lively hood and forced me to make a few trips to the pawn shop the obtain living expenses.
Is there a means with which to hold this bank accountable for there actions and attitude?
Thanks,
Mark Schmiedeberg
5128788569
San Marcos, TX. 78666
Under the “right to receive Social Security monthly payments”, It is my understanding that direct deposits from Social Security must be made to an account solely used to receive such deposits and not comingle other funds in this account. My wife and I both receive direct deposits into our joint bank savings account.
To protect these funds under the “right to receive “provisions from creditors and in bankruptcy, can this account remain joint if no other funds other than social security are deposited or must husband and wife have separate accounts into which to receive these funds?
i was wondering how a bankruptcy court treats social security disability different from social security retirement? thanks for your help.
See the URL. In Re Carpenter was overturned on appeal and the appeal held up to further appeal. Creditors in chapters 7 or 13 simply cannot touch Social Security monies past present or future.
The Carpenter case was reversed by the BAP and the Eighth Circuit:
Carpenter v. Ries (In re Carpenter), 614 F.3d 930 (8th Cir. 2010).
Dear Fellow Social Security Individuals, We are both on social security also. My husband is on SSA and I am on regular social security (disabled) but, do not have enough work credits to receive SSD. We had two seperate bank accounts for our checks to be deposited into. Our bank withdrew $500.00 from my husbands’ savings account; when my sepreate checking account where my SS check was depoisted; was hit by two fraudgulant businesses. These two actions caused my account to go in the red; and the bank charges built up to $1800.00 in three months. I proved one of the fraudgulant companies; the other was in Canada, and it seems we can’t touch them. After many talks with the bank, they only returned $75.00 of the charges to me. Over the next few months they increased their bank charges and again they say I owe them $1002. They dunned me with the major credit bureau and also the National bad check bureau. They did not report the $500.00 they withdrew from my husbands’ savings account. This action caused us much grief; and put my husbands’ truck payment behind… The bak is threatening to take me to court. I siad go ahead, we will see how the judge handles this case. I since a typed letter to the bank manager and the head of the banks’ legal department; it included the Federal Code: concerning the ruling about no one except a federal agency can attach money from any account that has deposits from the Social Security Benefits Department. Well, this is an on going problem. We have not received my husband’s $500.00 back and the bank has not notified the credit bureau or the national check agency that they took the $500.00 from an account where only social security money was deposited. Consider doing what we and alot of other senior citizens and other persons on disability are doing. Closing their bank accounts and having their social security checks direct deposited on to a DIRECT EXPRESS CARD ( Sign up for it through Social Security, Railroad or Veteran Pension programs ) CALL your officals and ask for this card. You use the card like an ATM card and you can pay your bills with it over the phone. No one can touch the money but you or a federal agency, like for taxes, or school loan debt.
HOW CAN I STOP creditors TOOK MY “SSI” MONEY FROM MY BANK DIRECTLY(COURT ORDER)
Judgment creditors (like credit card companies) cannot garnish your SSI – doing so is illegal. You need to advise the bank and the creditor that your SSI money is being garnished and demand that it be refunded. If you have co-mingled non-SSI money with SSI money you could have some difficulty with proof issues – I would strongly suggest that you speak with a lawyer to evaluate your options. Best of luck to you.
my daughter applied for disibilty and looks good but we were told all of her retro will go to unemployment..is that true ?
With the upcoming banks starting to charge debit card fees and other banking fees in the coming months and a person is receiving DISABILITY are they exempt from these fees under section 207, I know since I am a disabled veteran only the US Govt can get monies but how about the BANKS FEES are they exempt from taking funds from DISABILITY Thanks Mark
can ssdi payments be levied by the state? these federal funds are the only deposits made to this account. the ftb has taken my bank account (which are not ssdi deposits)
From everything ive read on this site it sounds like judgements cant b garnished from ssd benefits. So good site if i m being told right. Hope it helps u top
I live in Texas at my present address for 12 years. My first check from SSDI came to me in 1987. After that, I received a credit card apllication with my name on the envelope. I applied for credit to pay for some gold coins offered through the card company. There were silver coins on my cc order also. The gold and silver coins were my protection from inflation of interest rates. Since that time I moved to my present address and all my gold was stolen, the part=time job I served at the court house was closed because I was hospitalized and could not really fulfill my duties as deputy clerk. AFter losing my edge on inflationary recession to my nephew the thief and convict, my credit card debts begain to soar because of trivial spending habits like internet dating, cigarettes and drinks. My ego was bashed with disability theft rejection and I feel miserable and want away from my credit card debtors. I talked to a legal representative who stated that on SSDI I did not have to pay credit card debts and did not have to file bankruptcy. I called the representative back and asked her to give me the name of the law or the title of the law or the declaration of the law. Is she right? And, what is the exxact nature of the law?
i was a truck driver and was in a bad wreck ,i got ssi disability and a few years i tryed to drive again, and again , and again, it was the only thing i could do, then i went thru a audit, and now i lost my disibility and got a bill from ssi disablity for 30,000 dollars, and i have no means of paying the money they want. can filing bank rupsey help me be for i loose every thing else, and can the over payment can it be discharged in bankrupsey,
First, I am NOT an attorney and these are only my opinions. Generally, SS disability payments are NOT able to be garnished by non-governmental creditors. However, Federal governmental obligations still ARE able to be garnished. This includes things like taxes owed, student loans owed. In other words, the Federal government will still screw you, even if you are disabled. Now, if your SS funds are direct-deposited into a bank account, that brings up some sticky issues since non-governmental creditors CAN put liens on your assets and your assets include your bank accounts. I would suggest for ANYONE with financial problems and who get SS benefits or SS disability benefits to ONLY get their funds by check (which SS is phasing out) or put on the “debit card” type of direct deposit.
This is important for those who go without in order to save. I read on another site that Social Security is protected from creditors. Many other sites have said the same thing. Social Security Online says the same thing. It seems that way down on the bottom of some of these sights it says ONLY 2mos. are protected. This would basically mean that if you are willing suffer living very conservative and saving your money it would all be for nothing in that the creditors could TAKE all monies saved. This all came about via a law put in place in May 2011 as I read it to insure SSI recipients, and other government retirement would not have their bank accounts garnished. There was already law in place to protect retirement. The new, seemingly hidden wording is that the creditors can not garnish 2 mos. of SSI. This means that if you save the savings from SSI money can be garnished if I’m getting the whole Picture. If this is true the question is, what was the law before? The way I read it before May 2011 ALL Social Security monies were protected already. If I’m right the new law did us no real good. iN FACT IF i’M RIGHT IT HURT US. If only 2mos of SSI are protected where as before ALL SSI was protected the law has put our savings and us in danger. DOES ANYONE HAVE ANYTHING TO OFFER THAT WILL HELP CLEAR THIS UP? tHANKS
Will filing bankruptcy only against SSA overpayment hurt my credit score even though it is not against credit card companies whatsoever?
@Ruth: Social Security Checks exempt from credit card Collections. besides the way they did the paperwork it has to be signed, seems like what you got was fake. Once you get SSA or SSD you do not have to pay the credit cards again. You can always call a Attorney and ask even online you can ask Clark Howard. I am a disabled veteran and told all the credit card companies to kiss my you know what and hung up on them.
Mark
i am currently receiving ssdi that is in a personal bank account which this is the only deposit made. can this account be froze due to money owed to capital one if the win the case? i have a court date on 12/2 for summary judgement, since i will not be there to answer the judge should allow them the motion. How long if they can get into my account will they have to do so, also will I be notified at all or does this just happen and oh say 12/3 I cannot receive my bank funds?
thankk you for any help you can give me.
A credit card plaintiff cannot garnish a bank account where the only funds therein come from Social Security. You need to let both your bank and the plaintiff’s lawyer know that this is Social Security money and that any attempt to garnish it is illegal. The post above should answer your questions about this.
Mark is correct. Note, however, that your credit will be trashed if you stop paying your debts.
Jonathan,
I have been disabled since 2003, I tried going back to work in 2006 and then again in 2008. I worked part-time only because I couldn’t do the full time work. Well I filed my taxes and went on my merrily way till around 2010. In late 2010 my checks stopped and was told i would have to back pay 46.000.00 for me and 16,000.00 for my new child.
I was hospitalize and needed a heart by-pass and the surgery went wrong. I died and the reopened me up and corrected the problem a day late. My current doctors has rated my disabled to work for this new problem.
Now i have lost 50% of my heart muscle/ pressure. I have since been turned down three times. I have an attorney for the Social Security claim.
My question is: if I don’t get my disability back, can I file bankrupt on the back payments?
Thank you so much for these postings. If I understand the stricken through material, past due taxes cannot be collected from a bank account solely funded by deposits from Social Security benefits. Please confirm.
I would like to add that pension payments are not to be garnished .and should be separated
I have disabled since 2007 with a Non Curable Illness. My question is should I co-mingle my funds with my spouse’s or keep them separate, cause sooner or later I will be No longer be able to take care of myself. I already have Direct Deposit on my check. If I keep them separate will it make it easier for her or harder just in case I need full-time care or go to a Nursing Home this is for the long run? Do I need to keep them separate?
@Ruth: Take your money out if you owe any one right away do not take a chance especially child support
Irs put levy. On my savings account for taxes due to not having health insurancein mass. They drained my savings and plan on doing the same next month.I’m oon ssdi for mental health and can’t go pennyless for next two months please help
I have to bank accounts that are connected checking and savings. My social security is directly deposited into the savings and once a month auto trnasfer to the checking for me to pay my bills. The only monies deposited into either account are the SSI direct deposits. My only income. A levy was place on the checking account, removing all monies in the checking to a balance of $0. And leaving me without the funds for medicans and medical treatment I undergo. I contacted the bank, they gave me the name of the Company Target, I called them, they could not find my old account being 10yrs old. But had me call Patenaude & Felix, they said they served me in 2007 in Fresno Ca. Impossible I had not lived in Calif. since 2005. Fresno county courts cannot find a judgement! Can anyone help me. Disabled and legaly blind.
I’m 63, took early retirement and am receiving SS benefits. The IRS says I owe them from past years, beginning in 2009. The only income deposited to my bank account is my SS benefits. Can the IRS touch my bank account? What about for current taxes? I don’t make enough to file, but if they say I do, can they take my deposit for current year’s taxes allegedly owed?
thanks very much
Jo, I think that the IRS can go after your Social Security benefits. Generally, however, if you contact them, they will agree to some compromise that lets you keep most of your benefit. You do not want to sit back and let things happen – you should be proactive and contact the IRS sooner rather than later, and don’t hesitate to negotiate.
@Ray Morgan: Did you get an answer to the question?
Cyndi, you definitely need legal assistance with this situation. It seems to me that you should be able to collaterally attack the judgment on the grounds of improper service.
Brian, I believe that the IRS can levy a bank account for collection of past due taxes – I don’t know about other grounds. It would be wise for you to speak to a bankruptcy lawyer in your area for advice about this issue.
Jo, no that is not true. The IRS can withhold funds from your Social Security account to recover past due taxes.
Yes, I believe that you can.
i’m an adult child receiving total disability.i’m 57 years old and began receiving payments in my early 20′s/abouta year ago the social security administration re-evaluated my case and ever since then my benefits amount has been varying in amunts every couple months.i never know how much they’re going to deposit.this is horrible.i was receiving 849.00 for years..suddenly i was recieving 700 then a few months later less,then more ,then a month later a totally different figure..this month they only deposited 549.00 which doesn’t even pay my rent!!why is this occuring??this has been happening since last re-evaluation a while back.i never know if i’ll have enoough to pay my bils and this month i don’t!
Dennis, you may want to speak to a bankruptcy lawyer in your town about filing bankruptcy on the overpayment to avoid these deductions from your regular benefit amount.
I am filing chapter 7 bankruptcy. And I was wondering if I have to include my son social security dealth benifits as part of my income?
Thank you
Could you please advise me where I can get a copy of the form listing my debtors and the amounts I owed to them when I filed for Bankruptcy in April 2008. I have been discharged from Bankruptcy since 2009. I recently moved house and have lost some of my bankruptcy paperwork in the move. I am being harrassed by aktiv Kapital for part of this bankruptcy for the sum of £1,150.98 I have spoken to this company and other companies dealing with this same debt over the years giving them the bankruptcy details time and time again. I recently have had a heart attack from which I am still recovering and have explained this to them with promises from them that I will receive no more letters but still they keep coming and now after all this time they are now asking for a copy of my debtors list i gave with my application with my bankruptcy paperwork can you please help me as this stress is adding to my poor health.
This coming March, there will be no more checks mailed for SSDI. If the checks are deposited into Direct Express accounts, can Massachusetts child support attach the account and take all monies deposited in the account?
My bank account was levied by NYS Tax Dept. but after one very nice phone call to them explaining that I am living on Social Security ($715) a month!!! LOL They immediately called the bank and reversed the levy. My issue is with my bank!!! W—– Bank levied my account for NYS taking $136 for NYS and then took $100 for themselves, overdrawing my account $93.20!!! THIS IS WRONG AND SHOULD BE AGAINST THE LAW. IF NYS CAN’T TOUCH MY MONEY WHY CAN W——???????????? I am contacting the local news company and anyone else who will listen. I HOPE MY $100 WAS WORTH ALL THE BAD PUBLICITY THAT WILL COME FROM THIS!! THIS IS DISGRACEFUL. I CANNOT PAY MY BILLS NOW AND THEY JUST MADE IT IMMPOSSIBLE FOR ME TO PAY MY ELECTRIC BILL! THANKS ALOT W——!
Linda, I believe that SSDI funds are not protected from garnishment by child support (by contrast SSI funds are protected). I think, therefore that any bank account containing SSDI funds is at risk. You may want to talk to your bank to learn more about their policies regarding enforcement of the garnishment. Don’t sit back and wait to see what happens – usually nothing positive happens.
Margaret, I assume that you are referring to a bankruptcy filed in the United States. You can get a copy of your petition at http://www.pacer.gov. Your attorney should also be able to provide you this information.
I would keep your funds separate from those of your wife.
Yes, a bankruptcy will always impact your credit score.
Your lawyer can answer this question for you.
I recently had the State of California put a lien on my bank account for state taxes. The account was used as a direct deposit of my social security retirement benefits and California State Workman’s Compensation temporary benefits since 2003.
Although I hired J.K. Harris tax consultants to represent my tax obligations in 1998, they did not properly submit all of the needed documents to neither the Federal tax nor the California State tax boards. For four years I kept trying to contact J.K. Harris as to the status of my overdue taxes because the State of California Tax board keeps liening and cleaning out my bank account.
Two years later I received a notice that J.K. Harris had a class action lawsuit settlement for not representing their clients. Two years later I received a check from the settlement for the amount of sixty-three dollars and nothing since then. I paid over fourteen thousand, six hundred dollars for their service with no results.
My tax liability has doubled since and now my social security direct deposit funds have been frozen and taken by the State of California. Both my temporary workman’s compensation deposits and direct social security are in the same bank account.
I have met with four other attorneys regarding this issue and they are all requiring another fifteen to twenty thousand dollars to represent me to start all over again with an offer and compromise of which I cannot afford nor do I have any assets to work with.
During 2001, I went to the I.R.S. site and discovered they had a program called “request for determination regarding independent contractor verses employee status for tax obligations”.
I completed all of the forms and added documentation to prove I was not a independent contractor but rather a “quasi-employee” of both the State of California and the various school districts I worked for since 1986 through 2001 and forwarded the documents to J.K. Harris and apparently J.K. Harris did not forward the SS-8 and documentation to the IRS nor the State of California.
Do I move my social security direct deposit form the bank that laid the monies for the State of California? And what happens to my workman’s compensation temporary disability that I deposited in the account?
This is to the point of no return and at 73 years old and no assets and no monies to hire yet another tax attorney seems unfair. Is this double jeopardy for trying to resolve my obligations to the State of California and the I.R.S?
Lawrence, I’m afraid that your best bet here would be to hire another tax lawyer to figure out what to do. I would hesitate to try to deal with the IRS or State of California on my own.