Your Social Security Disability Income Is Probably Safe...For Now

Is the Social Security Disability Insurance program on a path of self-destruction? Thanks to the aging population and high unemployment levels, a record number of Americans are collecting benefits, and the Social Security Board of Trustees is warning that the Disability Income Trust Fund will be exhausted in 2017 unless legislative action is taken. The Social Security Administration’s (SSA) Disability Insurance (DI) program paid almost $123 billion in benefits in fiscal year 2010 to more than 10 million workers and their dependents.

For many recipients, Social Security Disability Income (SSDI) and/or Supplemental Security Income (SSI) are their financial lifeline. Their more immediate concern may not be what happens in Washington to save the program, but what happens today to the money they receive. I couldn’t find any statistics about how many SSDI and SSI recipients have past-due bills, but if our email is any indication, plenty of them are struggling and getting calls from creditors or debt collectors threatening to take the little income they do get each month. And because it takes so long to get approved for disability these days, applicants may find themselves already in the hole by the time they start receiving benefits.

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If you are already receiving SSDI and/or SSI, then it is probably safe from creditors and collectors—for now. But there are still threats you’ll need to watch out for.

Before I describe how and when disability income is protected from creditors, here’s a quick background:

Social Security Disability Income may be available to workers if they have worked long enough to earn credits under Social Security, and they have a severe physical or mental impairment that prevents them from working for a year or more, or if they have a medical condition that is expected to result in death. According to the AP, the average monthly benefit is $927.

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Supplemental Security Income (SSI) makes monthly payments to people who have low incomes and little in the way of financial assets or resources, including those who are disabled. Children as well as adults may qualify for SSI disability payments. At the end of 2010, the SSA reported the average monthly benefit under SSI was $501.

Most disabled workers receive SSDI payments. A much smaller number receive only SSI and an even smaller percentage receive both.

For those who rely on these benefits, the good news is that they are generally protected from creditors and debt collectors. However there are exceptions in the case of past-due child support, past-due taxes, and federal student loans. “They can chase you (for student loans) to the grave,” warns bankruptcy attorney Cathy Moran.

“SSI payments cannot be garnished by any creditor,” says attorney Jonathan Ginsberg who practices bankruptcy law as well as representing consumers trying to collect SSDI benefits. ” Why? Congress has decided that SSI beneficiaries are hardly generating any income (around $660 per month maximum under the SSI rules) that as a matter of public policy it would not be fair to garnish their SSI benefits, even for child support or past due taxes.

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Mixed Up Social Security Benefits »

Image: Josh McGinn, via Flickr.com