The key to financial security is planning. The best time to plan, is before there are any clouds on the horizon. When it’s time for you to begin receiving social security there are several things you should know. First, social security payments are completely exempt from (most) creditor actions. It’s true that the IRS and other government entities may attach your social security. But, regular creditors (e.g. credit cards, utilities, judgment creditors) cannot.
I practice law in Illinois. These exemptions can be found in 735 ILCS 5/12-1001(g)(1) & in 735 ILCS 5/12-704
735 ILCS 5/12-1001 Personal property exempt.
The following personal property, owned by the debtor, is exempt from judgment, attachment, or distress for rent:
(g) The debtor’s right to receive:
(1) a social security benefit, unemployment compensation, or public assistance benefit;
(2) a veteran’s benefit;
(3) a disability, illness, or unemployment benefit; and
(4) alimony, support, or separate maintenance, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.
735 ILCS 5/12-1001 (LexisNexis, Lexis Advance
through P.A. 101-591 of the 2019 Regular Session of the 101st General Assembly)
735 ILCS 5/12-704 Exemptions from garnishment
Benefits and refunds payable by pension or retirement funds or systems and any assets of employees held by such funds or systems, and any monies an employee is required to pay to such funds or systems are exempt and are not subject to garnishment under Part 7 of Article XII of this Act [735 ILCS 5/12-701 et seq.].
735 ILCS 5/12-704 (LexisNexis, Lexis Advance
through P.A. 101-591 of the 2019 Regular Session of the 101st General Assembly)
Furthermore, not only are creditors prohibited from garnishing social security payments, they are also prohibited from attaching funds in bank accounts that were received from social security.
§ 407. Assignment of benefits
(a) In general. The right of any person to any future payment under this title [42 USCS §§ 401 et seq.] shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title [42 USCS §§ 401 et seq.] shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.
42 U.S.C.S. § 407 (LexisNexis, Lexis Advance
through Public Law 116-77, approved November 27, 2019)
Knowing this is the first step to building a plan.
Immediately upon registering for social security, start a new bank account. Have your social security payments directly deposited in that account, and deposit ONLY those social security funds into that account. Never intermingle funds! Once the funds are intermingled, they may no longer be protected.
If you have multiple streams of income, sequester the social security funds in a separate account and use all other monies first, BEFORE accessing the social security funds. If you have any savings, those savings should be directly attributable to your social security payments AND kept separate from all other funds.
So, if you are receiving, or about to receive, social security benefits make these changes right away. That way, if creditors start coming after you because you can’t pay your bills, you will be able to protect yourself and your family. If you are looking for other financial or tax advice, you should give me a call – Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.
