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Can Creditors Come After Your Social Security Benefits?

Maurie Backman, The Motley Fool

Not paying your debts can have some very serious consequences. If you're working and are delinquent on your payments, your creditors could get a court order to garnish your wages from your job.

But what if you're retired and in debt and your only source of income is Social Security? Can your benefits be garnished to satisfy debts at that point in life?

Your Social Security income isn't always yours to keep

Most of the time, creditors cannot come after your Social Security benefits to satisfy existing debts. For example, if you're behind on your credit card payments, personal loan payments, or medical bills, those creditors generally can't get at your benefits.

Older man sitting at a table and holding his head while looking at papers and folders spread out in front of him.

IMAGE SOURCE: GETTY IMAGES.

There are, however, a number of exceptions. First, there's the IRS. If you owe money on your taxes, the IRS can come after your Social Security income to be made whole. Specifically, the agency can garnish up to 15% of your benefits to satisfy an outstanding tax bill.

Similarly, if you become delinquent on student loans, your Social Security income can be garnished -- even if your education debt is many, many years old. Furthermore, your benefits can be garnished if you're behind on child-support or alimony payments.

If your outstanding debt isn't tax-related in nature, your first $750 a month of Social Security is protected from garnishment. But you could end up losing 50% or more of your benefits if you're behind on alimony or child-support payments.

Protecting your benefits

If you're behind on your debts and worried about having your Social Security income garnished, there are steps you can take to prevent that from happening. First, if you owe money to the IRS, reach out about an installment agreement. The IRS will usually work with you so that you're able to pay off your tax debt over time, and such an arrangement can help you avoid having your benefits garnished.

Meanwhile, if you're behind on your student loan payments, it pays to reach out to your lender and aim to work out an arrangement. You might manage to change your repayment schedule or even defer your payments if you've fallen upon hard financial times.

That said, if you're drowning in debt and your only source of income is Social Security, you may need to bring in a debt settlement firm or attorney to intervene. These professionals can negotiate your debts for you and, in some cases, wipe a portion of them out. Remember, the goal of any creditor of yours is to get paid, and in many cases, a party you owe money to would rather settle for collecting half the debt you owe than nothing at all. Therefore, don't assume that there isn't a way out of the hole you've dug for yourself.

You can also try filing for bankruptcy if your debt situation has gotten truly dire. Just know that if you do, not all of your debts will be dischargeable. In fact, the very debts that can cause your Social Security benefits to be garnished, like overdue taxes and student loans, are the same ones that a bankruptcy won't wipe out, so unfortunately, filing for bankruptcy most likely isn't the fix-all solution you might expect it to be.

If that's the case, then be proactive about addressing your debt problem -- before your one source of retirement income is diverted elsewhere and you're really left struggling.

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