Unpaid Debts: Do They Affect Social Security Payments?

To secure the lives of people especially during the retirement years, the US government devise many plans and adopt the best strategies. Social Security, a social insurance program by the US government offers benefits for disability, retirement, and death. This program or act was engaged into law in 1935 under President Franklin D. Roosevelt. This program highlighted a wealth transfer system whereby present workers were taxed at 2%, paid equally by the employer and worker. If an employee contributes to this program, then he/she will be able to get benefits in their retirement years, and even if they become disabled due to any reason or their partners die.

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There are many factors that place a great impact on the Social Security monthly benefits. Unpaid debts are one of them. So, if you want to receive your monthly payments from Social Security completely, then it is important that you need to know about everything related to debts.

Do unpaid debts affect Social Security Benefits?

There are several types of debt that may decrease your Social Security benefit payments. Do you know that? Of course, it is true. If you suffer from some financial losses and do not contribute to Social Security, then it may ruin your Social Security benefits. Some personal aberrant financial obligations or debt can garnishment of checks from Social Security, affecting your monthly Social Security benefit payments negatively. Surprisingly, this is one of the common things occurring these days. Many of the American people are experiencing this problem. many studies can be seen online, which conclude that it would be good if you clear your debts if any, in case if you do not want to delay your monthly benefits by Social Security.

A study reported that the number of recipients of Social Security aged 65 and older who had received a reduced check because of defaulted federal student loans raised by more than five hundred percent between 2002 and 2015. Upon seeing the statistics, there is more than 2.2 dollar trillion in consumer debt for people now in their sixties. If we talk about the senior group like 70 years and more than, the number has jumped to 1.2 dollar trillion. There are different reasons why they are in debt. Most of this debt comes from car loans, credit cards, mortgage loans, etc. Many people need to pay the college tuition fees of their kids or co-signed for that fees. These things may result in increased debts and impact their golden years if not paid on time.

Which unpaid debts could affect Social Security?

 Some delinquent or unpaid debts may produce a garnishment on checks from Social Security. In any case, if you need to pay for child support or alimony because of a court order, then it is likely to suffer from a decrease via garnishment. It happens only if you do not succeed in paying those payments and your payee goes to the court and demanding payment. This reduction may be as much as 50 to 65 percent of monthly checks from Social Security according to the appropriate law in your state. Another scenario is when you have to pay college loans and never succeed in paying them, then you will have to expect a garnishment.

Another reason may be one when you signed a college tuition loan and did not pay it, then a garnishment will be there. When you have unpaid taxes particularly from the Federal Govt., then you will be going to receive a garnishment from the IRS affecting your Social Security benefits, as they have your number. In any case, if you fall into the category where you belong to a crime, the court will be capable of garnishing your Social Security checks up to 25 percent.

Student loans and unpaid taxes

As discussed above, there are different reasons for getting a garnishment. One of the most common reasons is delinquent unpaid income tax from Federal Govt. according to this law, it is stated that the US Treasury Department may garnish up to 15 percent of a check from Social Security every month until a person pays the amount due in full. There are cases, where you can see that they have experienced much more garnishment than this, they are only left with basic living expenses. Don’t worry if you want to step out of this garnishment issue, there are several solutions and methods you can opt for.

If you are in this position, the best thing you can do is to contact the IRS and present your situation to them and try to crack a deal with them. If they can give you a good legal representation, then it will be going to offer a wise choice. Due to their support, you can get the total amount payable decreased and chances may be there, in which the garnishment can be eliminated altogether. Of course, not always, but it can be possible.

It is also said that a person cannot release student loan dues even with bankruptcy. If the guaranty was given by the government for those student loans, like official Federal Student Loans or federally backed college loans coming from the Education Department, then it can put a 15 percent garnishment on your payments from Social Security by the US Treasury Department. This thing does not cause your Social Security benefit on a monthly basis to drop down 750 dollars.

Do creditors have permission to seize Social Security money from a bank account?

It is one of the most interesting things you need to know. Yes, there are some cases, in which a creditor can seize your Social Security money from your account. It occurs only when you have kept the money in your account for over 2 months. A creditor along with a default court-ordered judgment or garnishment can snatch that money. If your money has been transferred to another account, then a creditor can also seize that money. To get out of this mess, you can talk to a bankruptcy or a debt lawyer, or seek legal counsel.