Can a Credit Card Company Take Your Social Security If You Have a Debt?

Are you overwhelmed by credit card bills?  Probably you’re wondering whether a credit card company can take your social security benefits to pay off the debt.  Here is some good news.  Private debt collectors, including credit card companies, cannot take your social security benefits to pay off your loans. Section 207 of the Social Security prohibits private debt collectors or bankruptcy courts from accessing your social security account to take all the funds for paying your debts.  Some of the rules that creditors must follow regarding your social security funds include:
  • They cannot take all the funds from your account. They must leave at least two month’s worth of social security funds in your account
  • They must have a court order asking the bank to freeze your account or to garnish funds from your social security account
Having your social security benefits deposited directly into your bank account is a sure way of ensuring it isn’t mistaken for cash that can be taken. If you receive a check, you may have difficulty explaining that it’s protected money. A check can see you lose the protections under section 207. 

Government Agencies Can Access Your Benefits

Section 207 of the Social Security Act prevents private debt collectors from accessing your account to pay off loans. While the private debt collectors are restricted, the government can access your social security account and take the money that you owe them. Thus, authorities can use your social security benefits to pay:
  • Federal student loans
  • Federally backed mortgages
  • Income taxes
  • State-ordered child support or alimony
The debt you owe determines how much the government takes from your account. Most of the time, the government takes 15% of the benefits.  Under the Debt Collection Improvement Act of 1996, the government should leave at least $750 in your account. However, if the government takes funds for federal income taxes, the act doesn’t require it to leave $750.  The government can also take your social security benefits to pay for your obligations to your children or ex-spouse.  

Ways Credit Card Companies Can Collect Payments

If a social security account is your only source of income, credit card companies and other creditors have limited options for getting their money.  However, that doesn’t mean the companies will just give up, especially if you owe them a lot. They’ll look for other means to try and recover their money.  Some of the actions the creditors can take include:
  • The creditor can sell your account to a collection agency which can hurt your credit score. Even if the step doesn’t affect your credit score, some lenders may require you to settle outstanding collection funds before you can access more financing
  • They can look for a court order to seize other funds from your account that aren’t social security funds. If your bank account has other funds apart from the social security money, it’ll be upon you to prove that the social security funds cannot be taken
  • If you owe an unpaid debt, government agencies can seize your tax refund to pay for the debt. The federal government can take the funds for debts owed to them, but other courts can also request the money for other purposes such as child support and alimony
  • The creditors can also report your information to credit bureaus. The negative reports lower your credit score and make it difficult for you to access financing
  • The company can also place a lien on your house. The lien may not force you to sell your real property. However, when a sale takes place, even by your dependents, the lien must be satisfied. A lien makes it challenging for you to sell or finance your property
Click here to learn more about credit card debts and other topics regarding debts.