Federally Protected Income
Several income types are protected from garnishment by federal law, meaning no state can override these protections: Social Security benefits (42 U.S.C. 407), Supplemental Security Income (SSI), Veterans benefits (38 U.S.C. 5301), Federal employee retirement/disability (5 U.S.C. 8346), Railroad retirement benefits, Civil service retirement, and Federal student aid.
These protections apply to private creditor garnishment. The federal government itself can sometimes garnish these benefits for taxes, child support, and federal student loans.
State-Protected Income
Many states provide additional protections beyond federal law: State unemployment benefits (protected in most states), Workers' compensation (protected in all states), Public assistance/welfare, State pension benefits, and Disability insurance benefits.
Some states are exceptionally protective. Texas, for example, prohibits wage garnishment for most debts entirely (with exceptions for child support, taxes, and student loans). Pennsylvania, South Carolina, and North Carolina also have very strong protections against wage garnishment.
Wage Garnishment Limits
For wages that are not fully exempt, federal law (Title III of the Consumer Credit Protection Act) limits garnishment to the lesser of: 25% of disposable earnings, or the amount by which weekly disposable earnings exceed 30 times the federal minimum wage ($7.25 x 30 = $217.50/week).
Many states set lower limits. In New York, the limit is 10% of gross wages or 25% of disposable earnings, whichever is less. In Illinois, the greater of 85% of gross wages or 45 times the state minimum wage is protected. Check your state's specific limits -- they may be more protective than federal law.
Protecting Exempt Income in Bank Accounts
When exempt income is deposited into a bank account, it generally retains its exempt status. However, once funds are commingled with non-exempt income, tracing becomes difficult. Federal rules require banks to automatically protect 2 months of Social Security or other federal benefit deposits from garnishment orders.
Best practice: keep a separate bank account for exempt income only. Do not deposit paychecks, freelance income, or other non-exempt funds into this account. If a creditor attempts a bank levy, having a clean account of only exempt funds makes it much easier to claim the exemption and release the freeze.
Frequently Asked Questions
Can my Social Security be garnished for credit card debt?
No. Social Security benefits are protected from garnishment for private debts including credit cards, medical bills, and personal loans. The only exceptions are federal tax debts, federal student loans, child support, and alimony. If a creditor garnishes your Social Security for a private debt, that garnishment is illegal.
Are pension benefits protected from creditors?
Most pension benefits are protected. ERISA-qualified pensions (most employer pensions and 401(k) plans) are generally exempt from creditor garnishment under federal law. State and local government pensions are usually protected by state law. IRA protections vary by state but are exempt up to approximately $1.5 million under federal bankruptcy law.
What happens if my only income is a combination of exempt sources?
If all your income sources are exempt (such as Social Security plus a VA pension), you are judgment proof. Creditors cannot garnish any of these sources for private debts. Keep documentation showing the source of all deposits to your bank account in case you need to prove the funds are exempt.
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