Senior citizens and disabled persons are particularly susceptible to debt and money issues. For those living on a fixed income, losing part or all of the federal government benefit on which the recipient depends on food and shelter and everyday living expenses can be devastating.
If an individual owes certain types of federal debt, (for example, unpaid taxes, interest and penalties due to the Internal Revenue Service, an overpayment by the Social Security Administration, student loan debt and debt from Base Exchanges on military installations), federal benefits can be reduced to repay these obligations. Fortunately, there are protections in place under federal law for important government benefits.
For example, the first $9,000 in Supplemental Security Income (SSI) benefits paid to an individual each year is protected from any offset. Veteran’s benefits generally cannot be offset, except to recoup an over payment from Veterans’ benefits. Federal student loan payments, other payments by the Department of Education, the Black Lung Act, and “tier two” Railroad Retirement benefits, are also protected.
Under an interim Treasury Rule, the most recent two months of electronic deposits from federal benefit payment for SSI, federal Civil Service Retirement Benefits, Veteran’s Benefits, and payments by the Railroad Retirement Board, Treasury Department, and the Office of Personnel Management, are protected against garnishment. Once the federal benefit is deposited electronically into the account, it cannot be taken by the government for a period of at least two months. During this time, the electronically deposited funds must available to the account holder.
Only funds electronically deposited into the account are protected under this rule. If money is deposited via a check, money order or inter-account transfer, such funds are not protected by this rule and can be subjected to garnishment.
One solution is to use a Direct Express prepaid debit card. Funds can be electronically deposited to the card. The funds on the card are available to the cardholder, and cannot be garnished. However, the cards are highly regulated and tend to have high fees.
State law may offer additional consumer protections. Other protections may be available under the federal Consumer Credit Protection Act (CCPA), Chapter 7 or 13 bankruptcy petitions, the Fair Debt Collection Practices Act, and state statutes of limitations. Consultation with a bankruptcy, consumer protection and/or an elder law attorney is recommended before debt or garnishment becomes an issue.
Questions? Let Jane know.
Jane Fearn-Zimmer is an Elder and Disability Law, Taxation, and Trusts and Estates attorney. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.