How 42 USC 407 Protects Your Social Security

Federal law provides protections for Social Security benefits, shielding them from most creditors. This protection is established by 42 U.S.C. 407, a provision within the Social Security Act that ensures these funds remain available for the basic support of recipients. The law’s primary purpose is to preserve the income stream that millions of Americans rely on for their daily living expenses. This legal shield covers the majority of situations where a creditor might attempt to seize funds, meaning benefits are not treated like other forms of income when satisfying personal debts.

Scope of the Anti-Assignment Rule

The core protection for Social Security benefits is the anti-assignment rule. This rule states that the right to future Social Security payments cannot be transferred or assigned to someone else. It also prohibits the use of most legal processes by creditors to take these funds, including garnishment, levy, or attachment. This protection applies to retirement, survivor, and Social Security Disability Insurance (SSDI) benefits. The law prevents these funds from being seized to pay for common debts like credit card bills, personal loans, or medical debt, and the protection is automatic.

Supplemental Security Income (SSI) payments receive similar protections under a different statute, 42 U.S.C. 1383. While both programs are shielded from most private creditors, the legal basis for the protection differs.

Permitted Garnishments and Levies

Despite the general protection, federal law creates specific exceptions that allow for the garnishment of Social Security benefits to satisfy certain debts. These exceptions are narrowly defined and apply only to obligations owed to the government or for family support. Private creditors, such as credit card companies or medical providers, do not have this authority.

Federal Tax Debts

The Internal Revenue Service (IRS) has the authority to collect delinquent federal taxes by levying Social Security benefits through the Federal Payment Levy Program. Under 26 U.S.C. 6331, the IRS can continuously levy up to 15% of each monthly benefit payment until the tax debt is paid. This action does not require a court order, but the IRS must provide the taxpayer with proper notice before the levy begins.

Child Support and Alimony

Court-ordered child support and alimony payments are another exception. Federal law, under 42 U.S.C. 659, permits the garnishment of Social Security benefits to enforce these family support obligations. The amount that can be garnished is determined by the Consumer Credit Protection Act (CCPA). The CCPA allows for up to 50% of benefits to be garnished if the recipient is supporting another spouse or child, and up to 60% if not. An additional 5% can be taken if support payments are more than 12 weeks in arrears.

Federal Student Loans and Other Federal Debts

The U.S. Department of Education can garnish Social Security benefits to repay defaulted federal student loans under the Debt Collection Improvement Act. The garnishment is limited to 15% of the monthly benefit, but it cannot reduce the remaining monthly payment to less than $750. This means if a person’s benefit is low, the amount garnished may be less than 15% or nothing at all.

This same act allows other federal agencies to collect non-tax debts through the Treasury Offset Program. The garnishment rules are similar, with a limit of 15% of the benefit payment. In all cases involving these federal debts, the recipient must be given advance notice and an opportunity to dispute the debt.

Special Considerations for Bank Accounts

The protection for Social Security extends to benefits directly deposited into a bank account. A federal regulation, 31 C.F.R. Part 212, requires financial institutions to follow specific procedures when they receive a garnishment order. This rule provides an automatic safeguard for a portion of a beneficiary’s funds without requiring any action on their part.

When a bank receives a garnishment order, it must review the account to see if any federal benefits were directly deposited within the previous two months, known as the “lookback period.” The bank must identify the total amount of these protected deposits and ensure that an amount equal to that sum, or the current account balance if it is less, remains available to the account holder. This protected amount cannot be frozen or turned over to the creditor.

For example, if a person received two Social Security payments of $1,500 each during the lookback period, the bank must automatically protect $3,000. Any funds above this protected amount may be subject to the garnishment order, and the bank is required to send a notice explaining what has happened.