Under certain circumstances, the government can seize part of your Social Security check to satisfy unpaid debts, including overdue federal taxes and delinquent federal student loans. In some circumstances, past due child support can also be deducted from your SS checks. This money comes out of your payments before you receive them and there is not a thing you can do about it.
Once Social Security benefits are deposited into your bank account, you have additional protections against third-party debt collectors looking to garnish funds, but the Government is taking these debts before it gets deposited.
How much you stand to lose depends on the details of your debt and Social Security benefits. For example, under the Debt Collection Improvement Act of 1996, the maximum allowable collection on a federal student loan debt has the least impact. They cannot touch the first $750 of your monthly benefits and can only take 15% of your check after that. Back due taxes can take 15%, of your entire check. Court-Ordered past due Child Support or Alimony has the largest bite; this can take 50-60% of your total check depending on which State you live in.
But even a small collection could have a big impact on your budget. Social Security benefits account for at least half of income for 48 percent of retired married couples and 71 percent of unmarried individuals, according to government statistics. For 1 in 5 couples and 43 percent of singles, Social Security is 90 percent of their income.
What can you do if you find yourself in this position? Negotiate with the IRS, Challenge the Debt, or see if you qualify for a discharge of your student loans based on disability. In a very few instances, you may qualify for a hardship exemption for some types of debts.