Hidden Costs: What You Need To Know About Unpaid Debt and Your Social Security

Aug 16,2019

For many adults in their retirement years, Social Security is an absolutely invaluable lifeline that helps them maintain their quality of life and standard of living. After years of hard work and recurring contributions, many retirement-age adults can now take advantage of this powerful social program.

That is, of course, unless you find yourself overwhelmed by unpaid debt. According to recent statistics, individuals aged 60-69 have amassed a staggering $2.2 trillion in consumer debt. To keep this figure in perspective, consumer debt among the same age demographic was $380 billion in 1999.

Facing the Challenge of Unpaid Debt

Unfortunately, many retirees reach a point where their regular income simply cannot cover the cost of their debt. 48% of married couples aged 65 and older currently collect at least half of their monthly income from Social Security payments. As you can imagine, these funds simply aren’t enough to cover standard expenses in addition to overwhelming consumer debt.

While a missed payment on a credit card won’t result in garnished Social Security checks, retirees should think twice before skipping payments on federal debt, such as student loans, back taxes, child support and more. In each of these situations, it is well within the right of the federal government to garnish Social Security checks in order to ensure that the debt is resolved.

Protecting Against a Garnishment

One fact that most retirees don’t realize is that there are limits to how long Social Security income can be protected from garnishment. According to federal law, Social Security income must be shielded from court-ordered garnishments for two months following the initial deposit. There are other caveats, however, that could still allow for debt collector to access this vital source of funds.

It is critically important to remember that the two-month window of protection mentioned previously only applies to Social Security checks that sit in the first location they were deposited. If you decide to move your Social Security income to a second bank, for example, these funds would now be exposed to debt collectors.

Staying Proactive

Many financial experts tell retirees that the worst possible thing they can do when confronted with unpaid debt is to ignore it or avoid discussing it. In some situations, resources may be available that can help create a path forward towards a debt-free lifestyle.

As an example, let’s highlight one of the most common sources of debt for individuals of all ages – student loans. The federal government currently offers an Income-based Repayment Plan in which the size of monthly loan payments cannot exceed 10-15 percent of your discretionary income.

Perhaps the best advice for any retiree relying on Social Security who may have received a garnishment notice is to hire legal counsel immediately. Consulting with an experienced attorney will help uncover the best possible steps forward and the options that may currently be available for protecting Social Security income.

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DISCLAIMER: The Walter Clark Legal Group blog is intended for general information purposes only and is not intended as legal or medical advice. References to laws are based on general legal practices and vary by location. Information reported comes from secondary news sources. We do handle these types of cases, but whether or not the individuals and/or loved ones involved in these accidents choose to be represented by a law firm is a personal choice we respect. Should you find any of the information incorrect, we welcome you to contact us with corrections.