Posted on Thursday, March 26th, 2015 at 4:21 pm
At Lawrence & Associates, many of our clients come to us with garnishments already in place. Those clients are usually at the point of desperation, because a garnishment is the death sentence for the careful balance we strike with our creditors. Suddenly, instead of staying one step ahead of the bills, we are one step behind and losing more ground every day.
What Can Be Garnished?
When a judgment results in a garnishment, it’s important to know what can be garnished and what cannot. Everyone knows that a paycheck or bank account can be garnished, and that the IRS can withhold a tax refund to repay past due income taxes from a prior year. What many Northern Kentucky residents don’t realize is that social security disability checks can also be garnished under special circumstances.
Private Debt Collectors Can’t Garnish Disability Benefits But They Can Go After Bank Accounts
First, let’s start with private – as opposed to government – debts. Generally, private creditors such as credit cards or medical providers (think Capital One or St. Elizabeth Hospital) cannot garnish social security disability benefits. They can, however, garnish bank accounts that hold these benefits if the benefits are deposited by check or if the bank that holds the disability funds is also the bank you owe money to.
The U.S. Government Can Garnish a Percentage Your Social Security Disability Benefits
The amount of the garnishment depends on what kind of debt you owe. If you owe money to the IRS for back due taxes, the IRS can garnish up to 15% of your disability check. If you owe money for student loans, the government can also garnish up to 15%, although it cannot touch the first $750 of disability payments. If you owe child support or spousal support, your social security disability benefits could be garnished by as much as 50% to 65%!
Chapter 13 Bankruptcy Stops Private and Government Garnishment of Your Social Security Disability Benefits
In Northern Kentucky, a Chapter 13 bankruptcy is a good way around a social security disability garnishment. Even the government has to obey the automatic stay, which is the bankruptcy court’s order that requires all creditors to stop collecting their debts once a bankruptcy is filed. In a Chapter 13 bankruptcy, you can pay off non-dischargeable debts – such as student loans, taxes, or child support – over a three to five year period without those debts incurring interest or penalties in the meantime.
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