It’s not uncommon for people to borrow money without intending to repay it. However, life can sometimes throw unexpected curveballs that make it tough to keep up with financial obligations. Defaulting on debt can have serious consequences, including damaging your credit, getting sued, and in some cases, having your wages garnished. But can a creditor seize your Social Security benefits to recoup past-due debts?
Certain debt consolidation scams can lead to your social security benefits being seized, such as delinquent taxes, alimony, child support, and student loans owed to the Department of Education. However, creditors and debt collectors cannot generally seize your Social Security benefits. This is because these benefits are considered exempt from garnishment, says debt settlement attorney Leslie Tayne, founder of Tayne Law Group.
Protected Social Security benefits
Social Security benefits are protected from seizure by creditors and debt collectors as long as they are received via direct deposit to a bank account. This protection applies even if a company sues you, you lose the case, and a court enters a judgment against you.
Benefits that are protected from garnishment and bank levies thanks to federal law include:
- Social Security benefits
- Supplemental Social Security Income (SSI)
- Veterans benefits
- Federal Employee Retirement System
- Civil Service Retirement System
- Federal Railroad Retirement, Unemployment, and Sickness Benefits
A debt collection agency threatening to take your Social Security income may violate the Fair Debt Collection Practices Act. This protection applies even when Social Security is your only source of income.
Exceptions to protected Social Security benefits

Your Social Security income may not always be protected from creditors. While collection agencies are not allowed to take your benefits, there are other ways they may try to collect the money you owe.
You could lose out on Social Security benefits down the line if you currently owe any of the following:
Federal income tax
The federal government can withhold Social Security benefits to collect past-due taxes. This process does not require a court order and can be carried out by the Department of the Treasury. There are various methods for collecting overdue taxes, including issuing a Notice of Levy.
Another approach to collecting debt is known as the Federal Payment Levy Program. In this program, the Department of Treasury may withhold up to 15 percent of your monthly benefits until the debt is paid in full. There is no appeal for reductions in Social Security benefit payments.
Federal student loans
One way the government can ensure that you repay your federal student loans is by withholding Social Security benefits once you reach retirement age. Because the government is your creditor, it has the right to take this action. This policy is analogous to how income taxes are handled.
Your social security benefits may be garnished by up to 15 percent. However, the loan servicer must give you at least 30 days’ notice before taking this action.
Try contacting the loan servicer directly to negotiate modified loan payments and avoid garnishment. You might also get a financial hardship exemption from the Department of Education. You’ll need to fill out a Request to Stop or Reduce Offset of Social Security Benefits form.
Delinquent child support and spousal support
Depending on how much you owe in child support, alimony, or restitution, the Department of Treasury could withhold up to 65% of your Social Security benefits. This is done to enforce payment and is known as garnishment. According to Tayne, “this can be a significant amount of money that many depend on.”
It’s important to note that you generally cannot appeal to Social Security for implementing garnishment orders. So, if you find yourself disagreeing with any actions taken by government officials, your best course of action is to seek legal counsel from an attorney.
Although there are some exceptions, Social Security Income (SSI) cannot be garnished or levied by a bank. This is unless you were overpaid, and the Social Security Administration (SSA) is correcting the error.
Other ways creditors can collect payments
Creditors and debt collectors may have a more challenging time collecting money from you if Social Security benefits are your only source of income. This is because they can’t garnish your Social Security income or levy your bank account as long as the only money in it comes from the direct deposit of Social Security benefits.
However, companies may not give up easily on attempting to collect a debt from you, even if Social Security is your only source of income. This is because there are other ways that creditors and debt collectors can try to get the money you owe them.
There are other actions that a company may take instead of accessing your Social Security funds to collect a debt. Some examples of these actions include:
- Reporting negative information to the credit bureaus. Your credit score is essential. It can affect your ability to get new financing or services in the future.
- Selling your account to a collection agency. Outstanding collections may hurt your credit score. Some lenders may require you to pay off exceptional collections before qualifying for new financing. Therefore, it is essential to know the potential consequences of collections on your credit.
- Placing a lien on your house or other real property. Your unpaid debt may result in a lawsuit from the company that owns it. Losing in court could mean they are granted a judgment to put a lien on your home or other real property. This doesn’t force you to sell your property, but you would have to pay off any outstanding liens when selling or refinancing it. “License is a way of tying up assets and,” says Michael Sullivan, a personal financial consultant for Take Charge America. “A creditor may file a lien on the property, making it difficult for a consumer to sell or refinance.”
- Seeking a court order to seize non-Social Security funds from your bank account. Social Security benefits are protected from creditors and debt collectors. However, you may need to prove that the benefits in your account cannot be taken to keep them safe. Your bank or credit union must protect two months’ worth of benefits (if you receive them via direct deposit).
- Seizing your tax refund. The government may be able to hold your tax refund to pay off an unpaid debt. Once you deposit your refund into a bank account, private creditors might also be able to take the funds, depending on which state you live in. “The government can confiscate tax refunds,” says Sullivan. “Usually, that would be for debts owed to the government, but other courts can request the funds for child support, spousal support, or debts owed to the state.”
What to do if you are dealing with creditors

When you have more financial commitments than you can afford, it can be tempting to ignore the problem. However, ignoring your debt is usually a mistake. Defaulted debts might snowball into a more significant issue, even if your Social Security benefits aren’t at risk. Instead of pretending that your debt problem doesn’t exist, here are some better alternatives to consider.
Monitor your budget
There are lots of ways to save money, even when you’re on a fixed income. One way is to manage your budget carefully. But it’s also a good idea to closely examine your monthly spending. You might be able to reduce your expenses in some areas. Any extra money you have can be used to pay down debt or build up an emergency fund.
Get into credit counseling
Debt can be a difficult thing to manage on your own. You may want to consider credit counseling from a qualified, nonprofit organization. A credit counselor can help you by reviewing your financial situation and setting up a debt management plan (DMP). A DMP consolidates your eligible debts into one more affordable monthly payment. Your credit counselor may also be able to reduce your interest rate and get creditors to waive fees as part of the arrangement. Most DMPs take three to five years to complete and may come with setup fees and monthly administration fees from the credit counseling organization.
File for bankruptcy protection from your creditors
Bankruptcy can be difficult, but it may be the best option for you to protect your assets and get out of debt. Before making this decision, it is essential to understand the consequences of bankruptcy, such as credit damage. Some debts, like taxes and student loans, cannot be included in a bankruptcy filing. It would help if you considered all your options before deciding whether or not to file for bankruptcy.
Next steps
There are many things to consider when you can’t afford to pay your debts, and your Social Security benefits may be one of them. Before making any decisions, you must talk to an attorney about the potential consequences you could face.
Frequently asked questions

What types of debt can impact my Social Security benefits?
The amount of money you receive from Social Security each month can be decreased because of federal taxes that you owe, unpaid alimony or child support, and money owed for student loans.
Can debt collectors and creditors seize your Social Security benefits if you receive direct deposit?
It is essential to know that creditors and debt collectors cannot seize your Social Security benefits as long as you receive them through direct deposit to your bank account. Additionally, funds on a prepaid card are also generally safe from seizure. Knowing if a company sues you and you lose the case, and a court enters a judgment against you is helpful.
Can a third-party debt collector threaten to take your Social Security benefits when it’s your only source of income?
Debt collectors may violate the Fair Debt Collections Practices Act when they threaten to take away your benefits. This law protects consumers from unfair or abusive debt collection practices.