Can Credit Card Companies Garnish Your Social Security

Garnishment refers to a legal order allowing a third-party, usually a collection agency, to freeze and seize your assets, typically income from employment (wage-garnishment) or deposits resting in your bank account to cover for your debt after default on your credit card account.

Garnishing can happen after your credit card account defaults and shut down after you fail to pay credit card debt in consecutive billing cycles. But to answer the question of whether credit card companies or debt collection agencies can garnish your social security, the answer is no. Your social security falls in garnishment-exempt incomes when it comes to credit card debt and so collectors cannot take anything away from your social security. 

Types of Debts That Can Warrant Garnishment of Social Security

It does not mean that social security is exempt from all kinds of garnishments. The types of debts which can warrant a garnishment of your social security include child support, alimony and student loans owed to the Department of Education. 

Your Social Security is Safe

When it comes to credit card debt and social security, you’re safe regardless of whether you receive your social security on a prepaid card or direct deposit. 

Debt collectors cannot garnish your social security even if they win the legal case against you or even if it’s your only source of income. Even if debt collectors threaten to garnish your social security (which they can’t, by any means), it would have no legal standing and would actually violate Fair Debt Collections Practices Act. Knowing your rights in this case is crucial. 

Types of Incomes that are Safe from Garnishment

The Department of Treasury requires banks to automatically protect federal benefits from most types of garnishments. The exceptions generally include garnishment on default in alimony and child support etc. 

The protected benefits include:

• Social Security 
• Supplemental Social Security 
• Veterans Benefits
• Federal Railroad Retirement, Unemployment and Sickness
• Federal Employee Retirement System
• Civil Services Retirement System

Types of Debts That Can Warrant Garnishment of Social Security

It does not mean that social security is exempt from all kinds of garnishments. The types of debts which can warrant a garnishment of your social security include child support, alimony and student loans owed to the Department of Education. 

How Much of Your Income Can Be Garnished for Credit Card Debt?

Your social security is safe from credit card debt garnishment but your wages and bank accounts that hold other types of income aren’t. If a judgment creditor or debt collector is garnishing your wages, federal law states that it can take no more than :

• 25% in your disposable income

Or,

• the amount that your income exceeds thirty times the minimum wage set by the federal government, whichever is less.

These conditions hold true for wages but not necessarily the garnishment of bank accounts, with some exceptions.

3 Ways You Can Protect Your Money From Garnishment

1- Tenants By Entireties 

You can switch to a Tenants By Entireties Bank Account. These accounts are allowed for married couples who can deposit their income together. You can get your wages or savings directly deposited in Tenants By Entireties Account. These accounts are exempt from getting garnished by creditors of one of the spouses. 

2- Offshoring Income Other Than Exempt Benefits

You can open an offshore bank account outside of the US to deposit income from employment and/or investments and keep only the income from exempt benefits (Social Security, Retirement Benefits etc) in your local bank account. 

Most people assume that offshore banking is illegal due to its depiction in pop culture but that is not true. Having an offshore bank account is as legal as it gets. It’s also virtually impossible for debt collectors to after offshore accounts in countries that are signatory to the Common Reporting Standards. This treaty was introduced in order for banks across the world to automatically share client information. Countries that are not party to the treaty have banking infrastructures that keep client information confidential. 

Georgia is a popular country with a sophisticated banking system and it is not a signatory to the common reporting standards treaty as of 2022. On the other hand, Switzerland committed to common reporting standards in 2017 so the country is no longer popular in terms of offshore banking. 

3- Open A Bank Account in a State that Prohibits Garnishment of Bank Accounts

If you’re living in North Carolina, Texas, Pennsylvania or South Carolina, your wages are automatically protected from garnishment, that is, judgment creditors cannot get a legal order to direct your employer to deduct the garnished portion of your income.

However, if you deposit the income in a bank account, it no longer counts as income in some states and the judgment creditor can ask the bank to freeze your account. Therefore, to protect your bank account, you could open it in states that prohibit garnishment of bank accounts like Delaware.