For many people receiving disability benefits or Supplemental Security Income from Social Security, payments are received by electronic transfer. The agency sets up these monthly transfers to save on paperwork, and improve security and timeliness of the benefits. However, when an account is subject to garnishment, issues can arise if "exempt" disability benefits are mixed with other kinds of income.
The Garnishment Process
When a creditor wins a judgment against a debtor, the judgment gives the creditor authority to pursue garnishment to collect the debt. State law governs this process, and places limits on the amount and type of funds subject to garnishment. In most cases a clerk or sheriff will issue a writ of garnishment that can be served on an employer, or any other entity that pays the debtor. If the garnishment order meets the legal requirements, and the debtor doesn't appeal, the payer diverts funds to the court or directly to the creditor.
Federal Restrictions on Garnishment
By federal law, Social Security benefits of any kind, including disability, are exempt from garnishment or levy. The agency will not garnish funds from one of its own payments, and a bank should protect those funds from garnishment. A private disability check may be subject to garnishment, depending on whether or not state law exempts it. By the Consumer Credit Protection Act, there is a nationwide legal limit on garnishment of 25 percent of disposable earnings, or the amount by which earnings exceeds 30 times the minimum wage amount, whichever is less. Private disability benefits come under the definition of earnings.
Exceptions to the Federal Rule on Garnishment
The law makes exceptions for certain creditors, including child support collection agencies and the federal government. If you owe money to the IRS, Social Security disability payments can be garnished through the Federal Payment Levy Program. As of 2015, the limit on these tax garnishments was 15 percent of the total payment. In addition, federally backed student loans that go into default can subject a disability check to garnishment. For all government creditors other than the IRS, however, the first $750 of a monthly disability benefit is exempt.
Garnishment of SSI Benefits
Supplemental Security Income allows disabled individuals not eligible for regular Social Security disability to draw a monthly benefit, which as of 2015 had reached $733. SSI is a "means-tested" program not open to applicants who earn over a maximum monthly amount, or have more than a maximum level of personal assets. In many cases SSI beneficiaries have no other source of income, and federal law bars garnishment for SSI benefits by any agency, federal or state.