Are Social Security Benefits Protected From Garnishment or Bank Levy?

If you are receiving Social Security Benefits, most are protected from creditors, but not all!

social security garnishmentIt is a common misunderstanding that a debt collector has the right to garnish your income or bank account for an unpaid bill.

While this is kind of true, it is very important that you realize that a debt collector CANNOT apply for garnishment or a bank levy without first being awarded a judgment by the courts.

Having said that, you must also realize that the IRS and State Agencies CAN garnish or levy for certain debts, such as:

  • Child Support
  • Spousal Support (alimony)
  • Federally guaranteed student loans
  • Federal and State Taxes
  • Other debts owed to State or Federal Agencies

Rather than get into those debts, let's talk about what can or cannot happen to your Social Security Benefits if a debt collector (again, not from the list above) receives a judgment.

Let's say that you have an unsecured credit card debt, and you just cannot afford to make the minimum payments.  The account becomes 30,60 or 90 days past due and you are receiving phone calls and nasty letters. 

It is at this point that your credit card account may be sent to a collection agency.  Now things really get serious.  More calls and letters, but now you can put a stop to those calls:

STOP Collection Calls Free Sample Letter

It is one thing to put a stop to the calls, but the letters will continue.  Too many people are so frustrated about being in such a terrible financial situation that they do their best to ignore these letters.

If that's what you have done, then it is possible that the debt collector will file a complaint.

A "complaint" is a legal process whereby the person who is owed the debt contacts an attorney (licensed in your state) and the attorney files the proper paper work (complaint) with the court in your county.

Next, you will receive a SUMMONS, and this is a little scary!

The worst thing you can do is to ignore the summons.  DO NOT IGNORE A SUMMONS!

Most of the time, some sort of settlement or agreement can be worked out even after a summons is issued, but if you do nothing, a court date will be scheduled and the debt collector will be awarded a judgment.  This is called a Default Judgment, as the debt collector (plantiff) was awarded the judgment because no one from your side (defendant) was there to argue.

By the way, unless you can prove that you do not owe the debt, there is really no reason to give the legal "ANSWER" that the summons mentioned.  Most courts charge a hefty fee to file an "ANSWER", and it must be "legally" correct, meaning you might have to pay an attorney for their services!

So now you know that except for the debts to the Federal or State governments and the other obligations mentioned above, there is a legal process that must happen before a garnishment or levy can happen.

But, let's say your creditor (debt collector) is awarded the judgment and sends a writ of garnishment/levy to your bank.  NOW WHAT?

Good news!  As of May 1, 2011, when a bank receives a garnishment writ or order, it must review your records or statements to determine if a Social Security check has been direct-deposited into your account in the past 2 months.  This is called the Look-Back Period.

The bank will determine the total amount of "exempt funds"...funds from Social Security Benefits.  SSI (Supplemental Security Income), Veterans benefits, and federal employee retirement checks will receive the same type of protection.

Other retirement income is also exempt from garnishment or levy, but is not given the same automatic "Look-Back Period" afforded direct deposits from Social Security Benefits!

Many banks or credit unions will help protect it's bank customers retirement funds from garnishment or levy, but you just assume they will!

If you are falling behind on your debts and have received a summons, then you should contact your bank immediately and find out what their procedure is if they are presented a writ of garnishment or levy.  Most banks will "FLAG" your account to notify anyone at the bank that those funds are exempt, BUT DO NOT TAKE IT FOR GRANTED! 

Another important point!!!!

Let's say that your Social Security Benefit is directly deposited in your checking account.  You want to move some funds to a savings account to make sure you have a little money set aside for a rainy day.  Seems like a good idea....WRONG!!!

If you transfer funds from the account that had received the Social Security Benefit, they are now NOT PROTECTED from garnishment or levy!


Let's say that you have a part-time or side business to help out.  You get a little money from this extra job and you deposit it in the same checking account that receives your Social Security Benefit.  Prior to May of 2011, these funds were considered "co-mingled fund" and now all of the funds were subject to garnishment or levy!

Now, the bank will exercise the 2 month "Look-Back Period" and will determine how much is from Social Security and how much was from another, unprotected source.  Those funds would be subject to garnishment or levy.


Once you have received a summons, you know that the debt collector is very serious and will do every legal thing they can to collect that debt.

  • 1)  Contact your bank to determine what level of protection you have from a possible garnishment or levy.  If they don't give you a good feeling of security, consider moving your account!
  • 2)  If you receive "other sources of income", you should consider not having them direct-deposited or deposited at all!  I know, but until this summons/debt is dealt with, I would not risk it!  I've seen a client of ours who was too stubborn to take our advice have a coupld of thousand of dollars "frozen" by his bank and he couldn't make rent or buy groceries!


Yes, Social Security Benefits are protected from garnishment or levy, but you CANNOT take it for granted!

If you receive a summons, then you must be pro-active.  The worst thing you could do is to do nothing.




Photo by Heidi Elliot

Tags: wage garnishment, debt collectors, wage garnishment in oregon, can social security be garnished, exemption from garnishment, levy, social security benefits, bank

Can a Creditor Take Funds From a Reverse Mortgage?

reverse mortgageIf you have a REVERSE MORTGAGE on your home, a creditor cannot garnish, levy or lien.

If you are one of the millions of people who have decided to get a Reverse Mortgage (RM) on your home to help your financial situation, and have other significant debt, you need to understand what a creditor can and cannot do.

I'm not going to discuss the pros and cons of a reverse mortgage, but only address the characteristics and how it would apply in a collection situation.

A reverse mortgage is a LOAN.  The company that sold you the reverse mortgage (RM) took into consideration how much net equity you had in your home.

Let's say it was $100,000 (doesn't matter if the home was paid for or not).

The RM company is LOANING you 70%-80% on the value of your home to be paid out:

  • One-time lump sum
  • Payments
  • Credit Line (you use when you need to)

The RM company has determined that based on the net value of your home, your age and other factors, they  can LOAN you $XXX.00.

When you pass away or the home ownership is transferred, the LOAN, with interest, must be repaid. The idea is that at death or transfer of ownership, the RM and repayment cancel each out.

  • The home owner wins and they were able to get at the equity of their home and remain living there.
  • The RM company wins as they earn more money than they loaned through interest and fees.

So, can a creditor or collector GARNISH, PLACE A LIEN OR LEVY funds from your RM?


Since a RM is a loan, you do not own the home anymore.  You live there and everything stays the same, but you have "pre-sold" it to the RM Company.

Therefore, a creditor CANNOT garnish or place a lien.

What about the funds from the RM deposited in your bank account?

This is why I said "BE CAREFUL!"

A creditor that has been awarded a judgment for the claim they made against the debt you owe (credit card, personal loan, etc.) cannot apply for a garnishment or bank levy if the source to the funds are from:

  • Federal Benefits (Social Security, Federal Retirement Income, Civil Service Retirement)
  • Unemployment Income
  • Dissability Income
  • Alimony or Child Support
  • Various other NON-EARNED INCOME sources including your RM income


If you CO-MINGLE funds from your RM or other sources above with the income you may be getting from a full or part-time job (W2 Income), then a creditor may be able to get at those funds.

The safest thing to do is to open up a separate bank account for the earned income and NEVER CO-MINGLE with the other sources of income.

reverse mortgage



Tags: reverse mortgage, debt collectors, levy, garnishment