Can Creditors Garnish Disability Wages?
A workers who has paid enough Social Security taxes through wage deductions is eligible for disability if she meets specific government criteria. Quite simply, if you can't perform the same job duties as you did before and probably won't be able to perform other types of work for a period exceeding a year, then you qualify. If you're saddled with debt and concerned that your creditors will garnish your disability income, relax, but take precautions.
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Garnishment and State Laws
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Generally speaking, creditors may not garnish disability payments received from the Social Security Administration. If you're receiving government-funded disability payments, these payments are "judgment proof," according to Fair Debt Collection's website. Proceed with caution, however; states have a lot of leeway when determining what funds can and cannot be garnished. And if your disability funds are commingled with other, garnishable funds, mistakes are likely. Although recent legislation requires banks to use internal controls to identify which funds are and are not garnishable, Bankrate recommends keeping disability funds in a separate account.
It's Your Responsibility
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Despite these rules, mistakes are made frequently enough that it's in your best interest to protect your funds by taking action. According to Bankrate, many creditors simply notify banks that debtors "have income," nebulous phrasing at best. Once the funds are garnished, if too much time passes it becomes difficult to get the funds back. Since creditors have to get a judge to agree to a garnishment before they can take your funds, it's up to you to notify the court that you're receiving disability. California, for example, provides a one-page document for disability recipients; complete the form and return it to the court.
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Protected Payments
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Although state law is the ultimate arbiter, disability payments aren't the only type of income that's protected from creditor garnishment. Unemployment payments, veteran's benefits and other types of public assistance are protected, as are child support and alimony. Workers' compensation and money received because of a wrongful death or life insurance claim are usually exempt, as are pension and annuity payments. Student loan proceeds are safe, as well. Keep in mind that the Internal Revenue Service has a lot of power, however; if your creditor is the IRS, then these rules may not apply. To find out what is and isn't safe, contact an attorney licensed in your state.
Additional Protections
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Instead of commingling these funds with garnishable monies -- for example, if you have a joint checking account and your spouse works -- consider having disability wages deposited directly into a separate account. Alternatively, have a check mailed directly to you. Bankrate also suggests hiring an attorney; while attorneys aren't cheap, each state's bar association keeps a list of licensed attorneys willing to do pro bono (free to those who qualify) work. Whichever route you choose, you must take action. Otherwise, you may become stuck in an endless loop of garnishment and fighting.
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References
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