Final Rules on Creditor Garnishments from Benefits

We are often asked if disability benefits can be garnished for child support, past due judgements or back taxes. Your disability benefits can, indeed, be garnished, but garnishment will depend upon your situation. In general, Disability Benefit garnishments can apply but there are strict rules about what can be garnished.  

The Final Ruling: SSA Rules for Disability Benefit Creditor Garnishments

Before, creditors could get garnishment orders against someone’s earnings. These orders didn’t need the approval of a court, and they could target any of a person’s benefits. Because notification wasn’t needed, federal benefits could “skip” the garnishment process.

This caused problems. Financial institutions had to temporarily freeze orders if a claim dispute happened. As of July 28, 2013, creditor garnishment rules were created: the Notice of Proposed Rulemaking (75 Fed Reg. 20299). This SSA ruling served helped to protect the coverage and benefits of SSI Beneficiaries and Social Security Beneficiaries alike.

What Did the Final Ruling Change?

Before, the freezes mentioned above would block a person’s access to benefit funds. In some cases, these funds were blocked for months. After the Notice of Proposed Rulemaking was passed, the Final Rule (78 Fed. Reg. 32009), required financial institutions to carry out several actions when a garnishment order happened.

Disability Benefits can still be garnished, but they’re restricted a little by the Final Rule.

The Final Rule and You: How is Your Garnishment Reviewed?

First, your financial institution will receive a garnishment order. Before it can be fully processed, however, your garnishment order will be looked at closely. A garnishment order made by a state child support enforcement agency, or by the United States, however, isn’t affected by the Final Rule. These entities have certain executive powers.

The Review Process

During review, the garnishment order’s history is looked at. Every person’s benefit account has a “lookback period.” Your account’s lookback period is important, as it’s a record of your current statements, new benefits and garnishment requests. Your account’s lookback period is 60 days, which is two payment cycles.

Accessing Your Account During the Lookback Period

When you’re notified about the garnishment order, you’ll be told the institution will have full, customary access over your account. This is a precaution used to protect account holders from freezes. It also keeps you from depositing exempt funds during your account’s lookback period, would trigger a total freeze and block your account access.

A garnishment request isn’t approved immediately. You’ll have some protection against a frozen account. You should, however, learn about your account’s protected amount.

Determining Your Protected Amount

Two numbers determine your account’s protected amount: the accounts balance during its review and the sum of all posted benefit payments which took place during the lookback period Your protected amount can’t be touched by a garnishment order. It also can’t be impacted by an account freeze.

How are Protected Amounts Determined?

Protected amounts are determined by a couple things. Primarily, they’re your account’s “backup fund.” Your benefit funds are important to your livelihood, and a percentage of them can be set aside as protected amounts.

Different accounts under your name, if you have them, need to be set up with separate protected amounts. Sometimes, your state’s law will protect an large amount of benefit funds for you. This can happen due to a disability, money concerns or several other things. While, again, your financial institution can’t touch your protected amounts, they can garnish any other fees five business days after the initial review.

Overall, the Final Rule is pretty effective. Since June 28, 2013, those who benefit from federal support are well-protected from frozen accounts. While there are still some restrictions, you won’t need to worry unless the government garnishes your account. Financial institutions are pretty good at complying with orders. If a temporary freeze does happen, your protected benefits won’t be garnished.