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Can You Lose Your Social Security Over Delinquent Debt?

By Robin Hartill, CFP® - Sep 22, 2021 at 6:04AM

Key Points

  • Part of your Social Security benefits can be garnished for delinquent federal student loan payments, taxes, and court-ordered payments.
  • Private creditors can't garnish your Social Security.
  • Social Security won't retroactively adjust past payments over unpaid debt.

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Here's what you need to know to protect your Social Security from creditors.

Sometimes you have no choice but to retire with debt, particularly when an illness or a job loss forces you to quit working earlier than you planned. If you're on a tight retirement budget, you may not be able to make all your debt obligations -- and perhaps you're wondering how that will affect your Social Security. Read on to learn how unpaid debt could affect your benefits.

Can Social Security be garnished for debt?

Yes, your Social Security benefits can be garnished over unpaid debt, but only in certain circumstances. Basically, the situations that would cause Social Security to withhold your benefits are similar to the ones that would cause the IRS to withhold your tax refund. In essence, if you owe the government or you've been ordered by a court to pay money in family law or criminal matters, Social Security could garnish your benefits.

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Here are some scenarios where delinquent debt could result in smaller Social Security checks: 

  • You're behind on your federal student loans. Social Security can withhold up to 15% of your benefit if you're behind on student loans. However, the first $750 a month of benefits is off limits.
  • You owe back taxes. The IRS can garnish up to 15% of your benefits if you have delinquent taxes. Unlike with student loans, the first $750 isn't protected.
  • You've been ordered to pay child support or alimony. If you're behind on court-ordered child support or alimony, up to 50% of your benefit can be garnished if you support a spouse or child who isn't the subject of the court order. Otherwise, up to 60% of your benefit can be garnished. If you're more than 12 weeks behind, an additional 5% can be seized.
  • You owe court-ordered restitution to a victim as part of a criminal case. Up to 25% of your Social Security could be garnished if you're behind on restitution payments to the victim of a crime you've been convicted of committing. 

Note that in all of these cases, your Social Security will only be reduced if you're delinquent on payments. Your benefits won't be withheld just for owing the debt. If your Social Security benefits are garnished, only your current and future monthly benefits will be affected. Social Security won't go after payments retroactively.

What debt is off limits?

Private creditors can't garnish your Social Security. If you have credit card debt, medical debt, private student loans, a car loan, or a mortgage, your benefits won't be affected if you get behind on payments.

Of course, the consequences of missing these payments are still serious. Obviously, you could lose your home or vehicle if you fail to make mortgage or car loan payments. Becoming delinquent on any of the payments listed above will still tank your credit score.

If you're working while collecting Social Security, a private creditor could sue you and obtain a judgment to garnish part of your paycheck. A private collector could also win a judgment to garnish your bank account. However, for Social Security and many other federal benefits, two months' worth of payments are generally protected from seizure. 

What if you're retired and can't afford your debt?

In a perfect world, debt payments wouldn't be part of your retirement years. But the reality is, it's often unavoidable. Retired or not, you have options if you're struggling to make debt payments, particularly when you owe the federal government.

You can typically get approved for an IRS payment plan in just a few minutes online if you owe taxes. If you have federal student loans -- including Parent PLUS loans that you took on for your child's education -- an income-driven repayment plan that will cap your payment at a percentage of your income is probably an option. You may also be able to ask a court to modify payments you've been ordered to make.

The bottom line is, if you're trying to protect your Social Security checks from garnishment, it pays to be proactive. Take action as soon as you know you won't be able to make a payment.

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