While lawyers and judges are the ultimate legal experts, of course, I believe that every citizen should take the time to learn a little about law for several reasons. First, it is important to know your rights, and knowing them can come in handy if anyone ever accuses you of a crime you didn't commit or threatens you legally in another other way. Second, learning about your local, state, and federal laws can help you act as a better citizen. When election time comes around, you can then truly understand ever change in law being proposed by a candidate and whether it benefits society or not. I plan to share posts about law topics explained in plain English on my new blog, so you can come back often to sharpen your legal knowledge!
If you're disabled and your primary source of income is in the form of federal disability benefits, you may find it difficult to make ends meet with what can feel like constantly increasing expenses. If you've been sued by a bill collector, or have been unable to make court-ordered child support or alimony payments, you could be concerned your income will be garnished or your bank accounts frozen if you fail to make payments in time. Is there anything you can do to protect your disability income from garnishment? Read on to learn more about this process.
Are disability benefits subject to garnishment?
The federal government has two types of disability programs to help provide income to those whose disabilities prevent them from holding down a job.
Social Security Disability (SSD) payments are based on your employment and earnings history, much like the Social Security retirement program. The longer you've worked, and the higher your salary while working, the more benefits you'll qualify to receive (up to a certain maximum). When you reach full retirement age, you'll be able to convert these disability benefits into Social Security retirement benefits at the same monthly benefit level
Supplemental Security Income (SSI) payments are available to those whose work history isn't lengthy enough for them to qualify for SSD payments. However, SSI is only available to those with no other sources of income and few assets; if you have more than $2,000 in liquid assets (or $3,000 if you're married), you'll likely be ineligible for SSI until you've spent these funds down.
SSI payments are exempt from being garnished, seized, or frozen by creditors -- even if a court has issued a judgment against you. However, there are some public policy exceptions that can allow for the garnishment of SSD payments. If you owe back child support, taxes, or student loans, it's possible your SSD funds can be garnished until these debts are repaid. (The same thing happens to those who default on their student loans or owe back taxes before applying for Social Security retirement payments.)
If you receive disability income through another source -- like a short-term or long-term disability policy paid through your employer -- these funds may be subject to garnishment under a broader variety of circumstances, and aren't protected from seizure the way federal disability benefits can be.
How can you keep your money from being garnished?
If you receive SSD but have other assets elsewhere, funds held in accounts into which SSD payments aren't deposited could be vulnerable to seizure from creditors for unpaid debts that don't fall into one of the garnishment exceptions. Therefore, the best way to protect these non-SSD assets is to consolidate your bank accounts so that your SSD funds are being deposited into the same account that holds the rest of your money. (If you have funds in retirement accounts like a 401(k) or IRA, these funds should be exempt from garnishment as well). This means that if a creditor attempts to garnish your account, your bank will be able to stop this process quickly.
If your debt falls into one of the garnishment exceptions (like tax debt or unpaid child support), moving it into an account into which SSD payments are deposited won't likely protect them, since SSD payments can be garnished for these limited purposes. However, you could be able to negotiate a repayment agreement with the IRS or other federal or state agency responsible for garnishing your income, allowing you to repay this debt over a longer period of time so that the disruption to your monthly cash flow will be minimal. You can also continue here for additional reading.