Can my pension and social security be seized?


Can Social Security the advantages are garnished? In some situations the answer is a categorical no, but in others it becomes a distinct possibility. Ultimately, it depends on who is making the garnish.

Key points to remember

  • The US Treasury can seize your Social Security benefits for unpaid debts such as back taxes, child or spousal support, or a delinquent federal student loan.
  • If you owe the IRS money, a court order is not necessary to garnish your benefits.
  • You will have to pay 15% of your social security for back taxes and up to 65% for alimony or alimony due.

What is payday garnishment and how does it work?

Here’s how the filling works. A commercial creditor you owe a debt to takes you to court and gets a judgement against you. Then the creditor asks the judge for an order to garnish your salary, bank account, and any other assets you may have to settle that debt. The judge approves the garnishment to equalize the debt. Are all of your assets vulnerable, including social security and retirement benefits such as a 401 (k) account or an individual retirement account (IRA)?

When the creditor is a business entity

For federal benefits, the answer is no. We’re talking about social security, veterans benefits, railroad pension benefits and Pension benefits from the Bureau of Personnel Management—Especially if the creditor has issued you a credit card or an auto loan and your payment is late. Creditors holding medical bills, as well as personal bills and payday loans, are also prohibited to seize these advantages. It is according to article 207 of the Social security law. It’s the law.

Regarding 401 (k) and IRAs, the former are generally safe from garnishment by commercial creditors as long as the money remains in the account, thanks to the Employment and Retirement Income Security Act, 1974 (ERISA), while the first million dollars in your IRA is protected by the Bankruptcy Abuse Prevention and Consumer Protection Act 2005 (BAPCPA).

If you are not ordered to repay taxes or child support, then the bank should review your account history (or accounts) for the two months prior to receiving the garnishment order. . If your social security or other protected benefits were directly deposited into your accounts during those two months, this is called “Look back period”: the bank must protect funds up to the total direct deposits. You are free to spend it on anything.

However, if you are still working, your creditor may garnish your paycheck and, depending on the state you live in, other eligible assets you may have, such as a house or a car.

When the creditor is the federal government

Suppose you owe back taxes to the federal government. Well, the Treasury Department is a different kettle. You are going to have to hand over 15% of your social security. Funds in a 401 (K) or IRA are also vulnerable.

If you owe alimony or child support, the federal government can also step in – you may need to lose up to 50% to 65% of your Social Security. Plus, the Internal Revenue Service (IRS) doesn’t need a court order to seize your benefits, it can do it itself.

When your bank receives the garnishment order, it has two business days to conduct a review and identify your accounts. If the order is to collect federal taxes or child support, the bank can freeze those accounts, even if the money comes from Social Security.

You can avoid garnishment if you make an arrangement with the IRS to pay off the tax arrears. In this case, it will no longer seize your Social Security benefits, although it retains the right to do so if you do not stick to your end of the bargain.

Pension plans set up under the Employees’ Retirement Income Security Act (ERISA), such as 401 (k) s, are generally protected from judgment creditors. The fact that 401 (k) plans are legally owned by your employer also offers some protection against federal tax privileges.

When credit is a federal student loan

If you become delinquent on a federal student loan, the government can take up to 15% of the unpaid debt. However, he is not entitled to the first $ 750 of your monthly Social Security and retirement benefits.

For example, if you have $ 850 in benefits, 15% of that amount would be $ 127.50. Because you cannot be given less than $ 750, the maximum that can be taken away from you is $ 100. This rule applies only to federal student loans, not to private loans.

The bottom line

Only the federal government can seize your Social Security and other federal retirement benefits. If you are in danger of such a scenario, get legal help. The American Bar Association provides links to free and inexpensive lawyers who can advise you.


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