The federal government can garnish up to 15% of SSDI benefits in order to collect back taxes, owed child support, or defaulted student loans. However, it is not possible for bill collectors to garnish SSDI benefits.
Options to Stop Student Loan Garnishment
Individuals may file for a total and permanent disability discharge for defaulted student loans. This discharge may be applied to Federal Family Education Loans, William Ford Direct Loans, Perkins Loans, TEACH Grants. However, the TPD program does not allow for the discharge of private student loans.
To qualify, individuals must show that their disability prevents them from engaging in regular work. Individuals need to provide medical certification that they have a terminal illness or that their disability has lasted for 60 months or longer that is expected to continue. Acceptable documentation includes VA medical records, SSA notice of award and disability determination, and physician records.
Individuals may also apply for a suspension or reduction of the garnishment. In order to qualify, individuals mus be able to demonstrate how the garnishment is creating a financial hardship. Documentation compiled by a Social Security attorney in Chicago can include bank statements and records of monthly bills and expenses.
Once an individual applies for a TPD discharge, it typically takes about 30 days for the application to be reviewed. In some cases, individuals may be subjected to a 36 month post-discharge monitoring period depending on the specifics of their case and the strength of their documentation.
A final option for stopping SSDI garnishment related to student loans is to rehabilitate the loan with the Department of Education at a lower monthly payment. Doing so can stop the garnishment so long as the individual remains current with the new payments.
Private Bill Collectors
Banks are required to protect up to two months worth of benefits from garnishment by private debt collectors. Prior to releasing funds to pay private debts, banks are required to verify the source of the funds in the account. For example, if you receive $1,500 in benefits per month, the bank must automatically protect a balance of up to $3,000.
Any funds directly deposited into the account that exceeds two months worth of payments may be garnished by private debt collectors even though SSDI benefits are protected from such garnishments. In such cases, it is up to the court to determine whether the money should be returned to the individual or applied to any outstanding debts owed to bill collectors.