For many New Jersey residents who have been rendered disabled due to physical or mental impairment, unemployment is one of their biggest fears. In such cases, Social Security disability benefits can be the savior from financial ruin. However, the question remains whether Social Security disability benefits can be considered income for the purpose of credit repayments.
As a general rule, Social Security disability benefits along, with veterans’ disability benefits and retirement benefits are exempt from credit repayment. It must, however, be kept in mind that money owed under financial legal obligations like alimony or child support might still be paid out of Social Security disability benefits.
The debtor’s banks are statutorily required by the federal laws to protect any money received from Social Security disability benefits from being subject to credit repayment. The banks even have the legal authority to freeze the debtor’s account if the creditor asks for repayment of the loan.
In case the creditors of the bank account holder requisition for garnishment, the bank may be statutorily required to evaluate the bank account. If the bank account has been deposited with Social Security disability benefits within a period of two months preceding the garnishment requisition, the bank may inform the creditors that the account is protected.
The bank can also calculate the other deposits made in the deposit account aside from disability benefits for calculation of account holder’s money. Many debtors find it beneficial to consult legal professional help to understand the legal requirements in such cases.
Source: Consumer Financial Protection Bureau, “Can a creditor garnish my Social Security benefits to pay a debt?,” accessed on March 13, 2015