How does unpaid personal debt affect my Social Security payments?
Did you know that there are some types of debt that can result in a reduction in your Social Security benefit payments? It’s true. Certain delinquent personal financial obligations (debts) may result in a garnishment of your Social Security checks, thus reducing your monthly benefit payments. You may be surprised to learn that this is becoming more and more common. It is quite disconcerting to know that so many retired Americans are dealing with this problem.
According to CNBC, “The number of Social Security recipients age 65 and older who had their checks reduced due to delinquent federal student loans increased by more than 500% between 2002 and 2015.” If you look at the statistics, there is over $2.2 trillion in consumer debt for people who are now 60 years old. For people age 70 and older, that number has risen to $1.2 trillion. Most of this debt comes from home loans, credit cards, car loans. A growing number of people who paid for their children’s college tuition, or co-signed, are also stuck with those debts well into their golden years.
What types of unpaid debts could result in Social Security garnishments?
There are many types of unpaid or delinquent debts that can result in a garnishment of your Social Security checks. If you have received a court order to pay alimony or child support, you can expect to see a reduction through garnishment if you fall behind on those payments and the beneficiary again demands court payment. This could be as much as 50-65% of your monthly check depending on the applicable law in your state. If you took out college loans that you never paid back, or college tuition loans that you co-signed but never got paid, expect a lien. If you have unpaid taxes, especially from the federal government, the IRS will most likely garnish your social security benefits and have your number. If you owe restitution for a crime, the court can garnish up to 25% of your check.
Unpaid taxes and student loans
As mentioned above, one of the most common reasons for garnishments on Social Security payments is federal income tax arrears. The law states that the US Treasury Department can garnish up to 15% of your Social Security check each month until the amount owed is paid in full. Occasionally, we find cases where much more has been seized, leaving only enough for basic living expenses.
If you find yourself in this position, it is important that you contact the IRS and try to reach an agreement with them, and obtaining good legal representation could be a very wise choice on your part. There’s a good chance you can reduce the total amount owed and, in some “severe financial hardship” cases, eliminate it entirely. Not always, but it is possible.
You’ve probably heard on the news that you can’t pay off a student loan debt even with bankruptcy. If those student loans were guaranteed by the government, such as federally backed college loans or official federal student loans that originated from the Department of Education, then the US Department of the Treasury would cause your monthly Social Security benefit to drop. under $750. Today, more than 4 million people over the age of 60 have student loan debt.
Suffice it to say, try really hard not to default on the debt you owe to the Federal Government because that’s where your social security checks come from.
Can creditors sixteen Social Security money from my bank account?
Yes, in some cases. For example, if the money has been in your account for more than two months, a creditor with a default judgment or a court-ordered garnishment can sixteen that money. If you transfer the money to another account, it can also be garnished by a creditor with a court-ordered garnishment to pay off an unpaid debt.
If something like this happens to you, or you are afraid of it happening, and you are living off your social security funds to survive, you should probably talk to a debt attorney, bankruptcy attorney, or seek legal advice. There are ways to prevent or reverse these things if you know the law and are diligent and proactive. In fact, the law is on your side to a large extent, as our government wants to protect seniors. No one wants to see you on the street simply because you are delinquent on a financial obligation, unpaid back taxes, or college loan debt.
If you have any questions or are concerned about your financial situation with bad debts and your social security benefits lifeline, then it’s in your best interest to give us a call. Every situation is slightly different and the law is complex on these matters. It is important that you know your rights and protect your social security income benefits.
