Can You Lose Your Social Security On Overdue Debt?

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Sometimes you have no choice but to retire with debt, especially when illness or job loss forces you to quit work sooner than expected. If your retirement budget is tight, you might not be able to pay off all of your debt – and you might be wondering how that will affect your Social Security. Read on to find out how unpaid debts could affect your benefits.

Can Social Security be seized for debt?

Yes, your Social Security benefits can be garnished on unpaid debts, but only in certain circumstances. Basically, the situations that would require Social Security to withhold your benefits are similar to those that would require the IRS to withhold your tax refund. In essence, if you owe the government or if a court ordered you to pay money in family law or criminal matters, Social Security could seize your benefits.

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

  • You are behind on your federal student loans. Social Security can withhold up to 15% of your benefit if you are behind on student loans. However, the first $ 750 per month of benefits is prohibited.
  • You owe back taxes. The IRS can seize up to 15% of your benefits if you have overdue taxes. Unlike student loans, the first $ 750 is unprotected.
  • You have been ordered to pay child support or alimony. If you are behind on child support or court-ordered support, up to 50% of your benefit may be garnished if you are supporting a spouse or child who is not the subject of the order. court. Otherwise, up to 60% of your benefit can be entered. If you are more than 12 weeks late, an additional 5% can be entered.
  • You owe court-ordered restitution to a victim in a criminal case. Up to 25% of your Social Security could be foreclosed if you are behind on restitution payments to the victim of a crime you have been convicted of committing.

Note that in all of these cases, your social security will only be reduced if you are in arrears. Your benefits will not be withheld just because you owe the debt. If your Social Security benefits are entered, only your current and future monthly benefits will be affected. Social Security will not go after retroactive payments.

What debt is prohibited?

Private creditors cannot seize your Social Security. If you have credit card debt, medical debt, private student loans, a car loan, or a mortgage, your benefits will not be affected if you are in arrears.

Of course, the consequences of missing these payments are always serious. Obviously, you could lose your home or vehicle if you don’t pay your mortgage or car loan. Becoming past due on any of the payments listed above will always lower your credit score.

If you work while receiving Social Security, a private creditor could sue you and obtain a judgment to seize part of your salary. A private collector could also get a judgment to seize your bank account. However, for Social Security and many other federal benefits, two months of payments are usually protected from foreclosure.

What if you are retired and cannot pay your debt?

In a perfect world, paying off debt wouldn’t be part of your retirement years. But the reality is that it is often inevitable. Retired or not, you have options if you’re having trouble paying off your debts, especially when you owe the federal government.

You can usually get approval for an IRS payment plan in a matter of minutes online if you owe taxes. If you have federal student loans – including Parent PLUS loans you took out for your child’s education – an income-based repayment plan that will cap your payment at a percentage of your income is likely an option. You can also ask a court to change the payments you have been ordered.

Ultimately, if you’re trying to protect your Social Security checks from garnishment, it’s worth being proactive. Take action as soon as you know you won’t be able to make a payment.


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