For most retirees, Social Security benefits are a significant percentage of their monthly income, so the threat of having that money garnished by a creditor is a pretty frightening one. Fortunately, you don't just have to stand by and let it happen -- there are steps you can take to protect your Social Security benefits.

Choose direct deposit

If a debt collector wins a lawsuit against you, they can ask the judge to issue a court order requiring your bank to turn over the money in your bank account. However, Social Security benefits get special protection from such action -- if they are direct-deposited into your bank account. By federal law, the bank must protect two months' worth of your direct-deposited Social Security benefits from most creditors (the exceptions are debts to the federal government and child or spousal support debts).

But if you get your Social Security benefits via a paper check, you get no such protection.

Senior couple holding hands

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Pay your taxes

Of all the various agencies that are allowed to garnish Social Security benefits, the IRS has the most access to your money. Most agencies can't touch the first $750 of your Social Security benefits each month, but the IRS doesn't have this limitation. If the agency places a tax levy on you, it can take 15% of your Social Security benefits until the entire tax bill is paid -- even if that reduces your benefits to less than $750 a month.

If you owe taxes, take action promptly, and you can minimize the potential damage. Most tax debts can be settled by an installment payment plan, which gives you time to take care of the debt (although interest will keep on accruing during the payment period, so it's best to pay off the debt as quickly as possible). You may even be able to get an offer in compromise, which can allow you to settle a tax debt for pennies on the dollar.

Get an income-based student loan repayment plan

You wouldn't think that student loan debt would be a big concern for retirees, but in 2015 there were 2.8 million adults aged 60 and older who were still paying off student loan debt, and 40,000 of them were experiencing Social Security garnishment because of those debts. Given that most retirees have little income to spare, adding student loan payments on top of their other expenses can cause real problems. And if you fall behind on your federal student loan payments, the Department of Education can garnish up to 15% of your Social Security benefits every month (although they can't touch the first $750 worth of benefits).

The easiest way to fix your student loan debt problems is to switch to one of the income-based repayment plans. These programs allow you to limit your student loan payments to a certain percentage of your monthly income, which can enable you to meet your payment requirements and get out of arrears on the loans. Better yet, the income-based repayment plans lead to automatic debt forgiveness: After either 20 or 25 years on such a plan, any remaining student loan debt is forgiven. If you're carrying a lot of student loan debt, these programs may be the only way to get those loans paid off while you're still alive to enjoy being debt-free.

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