Can Bad Debt Affect Your Social Security?- Flavio Joe Carreno

Many circumstances can leave workers unable to pay their debts until they retire. For some people, it may be an illness. For others, it may be a sudden job loss. These circumstances can send retirees into dire financial situations. If this applies to you and you want to know how the debts will affect your Social Security benefits, please read the article till the end. 

Debt Garnishment and Social Security

The first question we must ask is if Social Security can be garnished for debt? The answer is yes, but not in all situations can this occur. Recipients that owe money to the government and those ordered by the courts to pay money to family members or fines to the courts can expect their Social Security to be garnished by the Social Security Administration (SSA). 

Here are some other situations where the SSA can garnish your benefits to fulfill a debt obligation: 

• You have defaulted in the repayment of your federal student loans: Social Security can reduce up to 15% of your benefits if you have defaulted on federal student loans. However, the 15% can only come from everything you receive above $750. This means that if your total monthly benefit is $750 or less, there would be no garnishment. Therefore you don’t need to worry.

• You owe the Internal Revenue Service (IRS): It is allowed to come for your benefits if you owe the IRS. Likewise, for student loans, the agency can deduct up to 15% of your benefits. This time, nothing is protected. All of your benefits are fair game. 

• You flouted a court order for alimony or child support: Pending payments on court-ordered alimony and child support can also lead to the garnishment of your benefits. This time, the deduction can go as high as 50% if you are catering for another child or spouse or 60% if you are not catering for another child or spouse. In addition, if the payment deadline has been over twelve weeks, an extra 5% of your benefits can be garnished. 

• You owe court-ordered restitution in a criminal case: In this situation, you stand to lose up to 25% of your benefits. 

Note: garnishment of debt only comes when you miss payments and not just for owing the debts. If you owe debts and you pay at the appropriate time, there will be no garnishments. Also, garnishments do not affect whatever you have received from Social Security, but only your present and future benefits will be affected.

Debts that are Free from Garnishment

Debts owed to private establishments cannot be deducted from your Social Security. Credit card debts, mortgages, private student loans, auto loans, and other similar loans do not affect Social Security benefits. However, there are other serious effects of owing these debts. Not only will the debts affect your credit score and stop your future loans, but you could also lose your car or home, which will ultimately affect you after your retirement.

Suppose you are still employed and cannot fulfill your debt obligations to private establishments. Then such establishments or private debt collectors can sue you to court and get an order to garnish part of your salary. However, your federal retirement benefits are completely protected by law. 

Retired and Unable to Pay Debts? 

Some lucky people are able to pay off their debts completely before retirement. However, this is not the story for all. Some retirees take debts into their retirement years, and the loss of their paychecks makes it difficult to pay them off. This makes debt repayment challenging and remains for a long time.

Whether you are still working or retired, there are a few options open to those having difficulties paying off their debts, especially when the debts are federal debts. If your debts are taxes, the IRS has an online payment plan form. You can apply and get approved within a few minutes. If your debts are federal student loans, even Parent PLUS loans, you can opt for an income-driven payment plan. The plan uses your income to ascertain what you pay. You can also turn to the courts to adjust the amount of money you have to pay. 

The most crucial step to protecting your Social Security from garnishment is prompt action. As soon as you know you will miss a payment, contact the right authorities for help.

Contact Information:
Email: [email protected]
Phone: 8139269909

For over 30-years Flavio “Joe” Carreno of The Retirement Advantage has been a Federal Employee Retirement System specialist (FERS) as well as a Florida Retirement System specialist (FRS) independent advocate. An affiliate of PSRE (Public Sector Retirement Educators), a Federal Contractor & Registered Vendor to the Federal Government, also an affiliate of TSP Withdrawal Consultants.

We will help you understand your FERS & FRS Benefits, TSP & Florida D.R.O.P. withdrawal options in detail while recognizing & maximizing all concurrent alternatives available.

Our primary goal is to guide you into retirement with no regrets; safe, predictable, stable, for life. We look forward to visiting with you.

Not affiliated with the U.S. Federal Government, the State of Florida, or any government agency. The firm is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Although we make great efforts to ensure the accuracy of the information contained herein we cannot guarantee all information is correct. Any comments regarding guarantees, safe and secure investments & guaranteed income streams or similar refer only to fixed insurance and annuity products. Fixed insurance and annuity product guarantees are subject to the claims‐paying ability of the issuing company. Annuities are long-term products of the insurance industry designed for retirement income. They contain some limitations, including possible withdrawal charges and a market value adjustment that could affect contract values. Annuities are not FDIC insured.

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