Are you a grandparent who lovingly agreed to co-sign your grandchild’s college loans? Do you have unpaid alimony obligations under an old court order? You may have been under the impression since you retired that “Social Security Benefits are secure against all creditors,” and that they cannot be attached to satisfy a judgment. This is certainly the general rule. 42 USC 407(a) and 20 CFR 404.1821. However,outstanding alimony (and child support) obligations have always been an exception to the general rule. Unpaid federal student loans are also an exception to this general rule.
As of 1996, with respect to suits by the federal government that resulted in a judgment on unpaid higher education loans, the Debt Collection Improvement Act authorized Social Security benefits to be “offset,” (meaning, garnished) “[n]otwithstanding [§407],” 31 U.S.C. § 3716(c)(3)(A)(i). There is no statute of limitations. The US Supreme Court confirmed the government’s power to do so in Lockart v US, 546 U.S. 142 (2005) http://www.law.cornell.edu/supct/html/04-881.ZS.html Lockart involved a debt that was 10 years old.
Up to 15% of your Social Security payment can be garnished by the federal government if student loans are in default. The first $750/month of your SS benefit cannot be touched, though. If you are receiving Social Security Disability you can apply for the Total and Permanent Disability Waiver. See http://www.disabilitydischarge.com/Home/
I like to talk of planning for a good old age. You need to think ahead. With a nod to Samuel Taylor Coleridge,** these debts will be the proverbial “albatross around your neck” which, while easily ignored when you are in your working years, can become burdensome once you retire. If the loans are already in place, speak with your lawyer and see if you can create an enforceable obligation between the grandchild and you to try to protect yourself in the event of their default. If your family member approaches you, proceed with extreme caution, taking into account your own income, assets, and future ability to pay in the event of their default.
** The Rime of the Ancient Mariner, see http://www.online-literature.com/coleridge/646/
Call us for an elder care consultation, to discuss planning for a good old age … 732-382-6070