Can a Bank Put a Lien on Your Social Security if That Is Your Only Income?
When you owe other people money, they may sue you to attempt to recover the debt. Having a judgment against you puts you at risk for garnishment. Garnishment is the process of seizing your money at the point where it is distributed, rather than waiting for the money to reach you before attempting collection action. When all you receive is Social Security benefits, you should understand your rights and the income to which you're entitled.
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Significance
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Social Security benefits are payments you receive for working during your lifetime. The benefits represent a "safety net" of sorts for you and provide a minimum level of retirement income. Your payments are protected under Section 207 of the Social Security Act. This section of the law prohibits creditors from receiving future Social Security payments, because benefit payments are not transferable and not assignable.
Benefit
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You receive your Social Security benefit payments regardless of how much you owe to creditors. In most cases, these payments won't be taken away from you through a lien or any other method. Additionally, money deposited into your bank account that consists entirely of Social Security payments cannot be taken from you if this is your only source of income.
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Warning
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There are a few circumstances under which your Social Security benefits can be taken. Your benefits can be garnished for child support payments, government debts such as student loans and any back taxes you owe. Additionally, your other retirement accounts may not have the same protections as your Social Security benefits. For example, an IRA is protected from bankruptcy, but offers no explicit protections against creditor claims. Likewise, private annuity policies often function as a supplemental retirement plan, but may not be protected in your state. For example, Colorado does not provide any protections against creditor claims against annuities.
Consideration
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Some retirement plans do provide protections from creditors, similar to Social Security protections. Accounts such as 401k plans, 403b plans and other employer-sponsored retirement accounts are exempt from creditor claims. No lien can be placed on these employer plans, because they are protected under the Employee Retirement Income Security Act (ERISA). However, creditors can still garnish payments from these accounts.
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