I have written in great detail about the treatment of social security income in a bankruptcy case. What happens outside of bankruptcy? The answer is obvious: It depends.
Well, that was a worthless answer, wasn’t it? Not so fast. What if I throw in some statutory authority? And if you act right now, operators are standing by to give you a special deal on some case law!
It turns out that my apparently flippant answer, “It depends,” really is correct. Let’s see why.
I. What The Right Hand Giveth
The federal statute dealing with social security is the Social security Act (no big surprise there), which is Chapter 7 of Title 42 of the U.S. Code. Among its many provisions is what appears to be a blanket protection of social security benefits from the depredations of all creditors except the IRS (with emphasis added):
(a) IN GENERAL
The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.
(b) AMENDMENT OF SECTION
No other provision of law, enacted before, on, or after April 20, 1983, may be construed to limit, supersede, or otherwise modify the provisions of this section except to the extent that it does so by express reference to this section.
(c) WITHHOLDING OF TAXES
Nothing in this section shall be construed to prohibit withholding taxes from any benefit under this subchapter, if such withholding is done pursuant to a request made in accordance with section 3402(p)(1) of the Internal Revenue Code of 1986 by the person entitled to such benefit or such person’s representative payee.
Based on this statutory language you would naturally conclude that only the IRS can garnish your social security check. (After all, the IRS can take pretty much anything you have, and will accept payments in blood, plasma, body parts, and minor children. For all you IRS agents reading this post, I’m just kidding. I love you guys at the IRS, and support your constitutional right to keep and bear forms.) And you would be wrong.
By the way, notice that part (b) states that if any other statute limits the protection found in part (a), it must do so with explicit reference to 42 U.S.C. § 407.
II. The Left Hand Taketh Away
Congressional largesse in 42 U.S.C. § 407 is, to a great degree, undone by 31 U.S.C. § 3716(c)(3)(A) (with emphasis added):
(i) Notwithstanding any other provision of law (including sections 207 and 1631(d)(1) of the Social Security Act (42 U.S.C. 407 and 1383(d)(1)), section 413(b) of Public Law 91–173 (30 U.S.C. 923(b)), and section 14 of the Act of August 29, 1935 (45 U.S.C. 231m)), except as provided in clause (ii), all payments due to an individual under—
(I) the Social Security Act,
(II) part B of the Black Lung Benefits Act, or
(III) any law administered by the Railroad Retirement Board (other than payments that such Board determines to be tier 2 benefits), shall be subject to offset under this section.
(ii) An amount of $9,000 which a debtor may receive under Federal benefit programs cited under clause (i) within a 12-month period shall be exempt from offset under this subsection. In applying the $9,000 exemption, the disbursing official shall—
(I) reduce the $9,000 exemption amount for the 12-month period by the amount of all Federal benefit payments made during such 12-month period which are not subject to offset under this subsection; and
(II) apply a prorated amount of the exemption to each periodic benefit payment to be made to the debtor during the applicable 12-month period.
Thus, if you owe the feds money, they can garnish your social security checks to collect the debt (modulo, of course, the $9,000 exemption of part (ii)).
Technically, the feds can “offset” rather than garnish the social security check. However, the linguistic difference yields no operational difference from the perspective of the person losing part of a social security payment.
Notice that in compliance with the requirement in 42 U.S.C. § 407(b), 31 U.S.C. § 3716(c)(3)(A) explicitly refers to 42 U.S.C. § 407.
III. Garnishing Social Security To Collect A Student Loan Debt
An example of the feds using of 31 U.S.C. § 3716(c)(3)(A)(i) to garnish social security is found in the Supreme Court case, Lockhart v. United States, 546 U.S. 142 (2005).
In Lockhart the Court began its holding by stating its task in the case: “We consider whether the United States may offset Social Security benefits to collect a student loan debt . . .” Lockhart, 546 U.S. at 142. (There was a statute of limitations component to the inquiry which is no longer relevant due to a change in the Debt Collections Act; so I deleted it from the quotation ― hence the ellipsis.)
The social security recipient, Mr. James Lockhart, had taken out federally insured student loans that were eventually reassigned to the Department of Education. (The opinion doesn’t say who the original lender was; just that it wasn’t the DOE ― so it might have been a private lender.) After he was over ten years delinquent on some of the payments, the feds began garnishing his social security checks; so he sued. The case eventually bubbled up to the Supremes.
In a unanimous opinion ― pretty rare for the Supremes ― the Court held that the garnishment was proper under 31 U.S.C. § 3716(c)(3)(A)(i) because that statutory provision provided the feds with a carve-out from 42 U.S.C. § 407(a)’s protection of social security income from garnishment. Thus, the feds can even go after your social security if you’re delinquent on your student loan payments.
And since 31 U.S.C. § 3716(c)(3)(A)(i) contains no reference to student loans, it is not limited to student loan debt: The feds can go after social security to collect any debt you owe to the federal government.
IV. Only The Feds Can Garnish Social Security
31 U.S.C. § 3716(c)(3)(A)(i) only allows to the feds to garnish social security. Any other creditor is estopped by 42 U.S.C. § 407(a). Therefore, if some other creditor is garnishing your social security checks, contact a good federal litigator to help you stop the garnishment and get the money back.
V. Justice Scalia’s Concurrence
Justice Antonin Scalia filed a concurring opinion in Lockhart, in which he called into question the validity of 42 U.S.C. § 407(b) because it violated an important legislative principle stated first by Chief Justice Marshall in 1810:
“[O]ne legislature,” Chief Justice Marshall wrote, “cannot abridge the powers of a succeeding legislature.” Fletcher v. Peck, 6 Cranch 87, 135 (1810). “The correctness of this principle, so far as respects general legislation,” he asserted, “can never be controverted.” Ibid. See also Marbury v. Madison, 1 Cranch 137, 177 (1803) (unlike the Constitution, a legislative Act is “alterable when the legislature shall please to alter it”); 1 W. Blackstone, Commentaries on the Laws of England 90 (1765) (“Acts of parliament derogatory from the power of subsequent parliaments bind not”); T. Cooley, Constitutional Limitations 125-126 (1868) (reprint 1987). Our cases have uniformly endorsed this principle.
Lockhart, 546 U.S. 144.
Therefore, since 42 U.S.C. § 407(b) appears to bind subsequent legislatures, the hoary Marshall doctrine renders it invalid.
VI. The Moral Of Our Tale
If the federal government says that you owe it money, it can even go after your social security to collect it. Therefore, you should keep current on your debts to the feds. However, sometime it’s impossible to follow the “keep current” rule, and in some circumstances you can get relief.
For example, if you’re behind on income taxes, under certain conditions you may be able to greatly reduce the debt and get relief, or even discharge the tax debt in bankruptcy.
If you are a debtor in the Central District of California, and want to get relief from your creditors, or deal with overwhelming tax debt, contact an extremely knowledgeable and highly skilled bankruptcy/tax attorney to guide you through the process.