Beware: Social Security benefits can be garnished to pay some old debts
In 2021, the latest year with full data, 70 million people received benefits from programs administered by the Social Security Administration. The biggest groups of recipients are retired and disabled workers. Many spouses and children of those workers also are beneficiaries.
For most retirees, Social Security accounts for more than half of their income, according to the Census Bureau — and for some, it makes up most or almost all, of their income.
What happens when people receiving Social Security benefits have unpaid debt? Can those Social Security benefits be withheld, or garnished, to settle those debts?
Section 459 of the Social Security Act allows Social Security to attach income for some delinquent debts that you owe — but it depends on the type of debt.
"Federal law generally prohibits garnishing Social Security benefits, but they can be garnished under certain circumstances."
"Federal law generally prohibits garnishing Social Security benefits, but they can be garnished under certain circumstances," explains Leslie H. Tayne, financial attorney and managing director of Tayne Law Group in New York.
Social Security benefits cannot be confiscated to pay down credit card debt or a car loan, Tayne says. But they can be seized if you owe back taxes to the government, alimony to a former spouse, support to dependent children or restitution to a victim of a crime you committed.
The amount that can be withheld from your benefits depends on which of those obligations you are responsible for, which we outline below:
Alimony or Spousal Support
"The most common phenomenon since 1990 is 'gray divorce' (divorce after 50) and it often occurs between two Social Security recipients (or one) and the court can order spousal support be paid from Social Security benefits," says Derek Jacques, attorney at The Mitten Law Firm in Southgate, Michigan, who specializes in personal bankruptcy/debt relief, divorce and family law.
"The maximum amount that can be garnished for child support and alimony is 50% to 65%, depending on the circumstances," Tayne says. While the number of ex-spouses you have doesn't affect the rate at which your wages are attached, she says the amount that can be withheld does change depending on whether you currently support a family.
"If you don't currently support another child or spouse, up to 60% of your benefits can be garnished," she says. But, for example, if you got remarried and had another child, up to 50% of your benefits can be garnished. "In either case, if you're more than 12 weeks behind on payments, an additional 5% can be withheld."
Child support payments are another scenario in which Social Security benefits can be garnished. "The Debt Collection Improvement Act, passed in 1996, gives the Treasury Department the authorization to withhold Social Security for certain debt — and one of them is child support debt," Jacques explains. "This has actually been instrumental in collecting back child support from now-retired delinquent fathers."
Regarding how much, Tayne says the maximum amount that can be garnished for child support is between 50% and 65%, depending on the circumstances.
If you're behind in paying your federal taxes, the Internal Revenue Service can have a court garnish your Social Security benefits.
Federal Tax Debt
If you're behind in paying your federal taxes, the Internal Revenue Service can have a court garnish your Social Security benefits. Under the Federal Payment Levy Program, Jacques says the Treasury Department can garnish up to 15% of your benefits until your federal tax debt is paid off.
And while the amount garnished for alimony or child support falls within a range, Tayne adds an important note about federal tax debt. "The full 15% of your Social Security benefits can be seized, regardless of how much money is left," she says.
While garnishment for student loans and non-tax debt must leave you with at least $750 in benefits, Tayne says that rule does not apply when you owe federal tax debt.
Student Loan Debt
According to the New York Federal Reserve, in the fourth quarter of 2022, outstanding student loan debt totaled $1.6 trillion. Social Security benefits can be attached for student loans, but there are a lot of variables at play. "The maximum amount that can be garnished for federal student loans is 15%," Tayne says. However, she notes that this garnishment can't leave you with less than $750 in benefits.
"For example, let's say you received $800 in benefits per month; 15% of that would be $120, but garnishing that amount would leave you with only $680 in benefits — so the most that could be taken is $50," Tayne explains.
A Brief Reprieve for Students
Also, student loan collection efforts are currently paused. "A new debt relief initiative known as Fresh Start will keep that moratorium in effect for one year after the expiration of the federal repayment pause," Tayne explains. "So, wage garnishment for student loans won't resume until at least Dec. 31, 2023."
"Bankruptcy does not impact your Social Security benefits."
For those accepted into the Fresh Start program, their defaulted loans will be transferred to a loan service and classified as "in repayment" instead of "in default."
In addition, the fate of President Biden's student loan forgiveness plan, which could cancel up to $10,000 in debt for all students and $20,000 for people with Pell Grants, is still pending before the Supreme Court. If it is allowed to stand, the plan could provide financial relief for student loan holders.
Other Factors to Consider
There is no relief for lawbreakers who are under a court order to pay back people they have stolen from. "If you have been convicted of a crime and owe restitution, your Social Security benefits can be withheld by the Treasury Department as well," Jacques said. The amount cannot exceed 25%.
People who file for debt relief under Chapter 7 of the Bankruptcy Code take a "means test" that explicitly tells them to NOT include their Social Security benefits in their income, Jacques says. "Bankruptcy does not impact your Social Security benefits," he adds.
If your benefits are withheld to repay your debts, Jacques recommends filing an appeal with the Treasury Department.
"The Social Security Administration is not authorized to overrule a garnishment ordered by the Treasury," he says. "The best thing anyone can do is hire a good bankruptcy attorney who has experience in appealing in federal court, which is where the proceedings would take place."