Can a Judgment Creditor Garnish Private Disability Payments?

Many states don't allow judgment creditors to take your private disability income. And even if states do allow garnishment of private disability, federal law might protect all or a portion of those payments.

Some States Protect Private Disability Income From Creditors

The types and amounts of property and income that are protected from the reach of judgment creditors are governed by state and federal law. States "exempt" (protect) certain types of property from collection, and many states include private disability payments in their list of exempt property.

Protection of Private Disability Payments Under the CCPA

But even if your state doesn't expressly protect private disability payments, it's possible that a percentage of those payments are still exempt from collection. The federal Consumer Credit Protection Act (CCPA) protects 25% of your disposable earnings from collection (what's left after mandatory deductions) or the amount by which your wages exceed 30 times the minimum wage, whichever is lower. (15 U.S.C. § 1673(a) (2025).) (But different garnishment rules apply to different types of debt.) States must protect, at a minimum, this amount too (although some choose to protect even more).

A case in the Eighth Circuit Court of Appeals ruled that private disability income is included in the definition of "earnings" under the CCPA, and therefore is subject to federal garnishment limits. (See United States v. Ashcraft, 732 F.3d 860 (8^th Cir. Oct. 9, 2013).) In this particular case the United States government was trying to collect federal criminal restitution payments from the debtor. However, even though the case dealt with federal collection efforts (which meant that state law didn't come into play), because the federal law dictates the minimum amount of protection, it could be argued that states must also include private disability payments in the definition of earnings.

In addition, private disability payments are treated as earnings under the CCPA according to the U.S. Department of Labor Field Assistance Bulletin 2016-3. The Department concluded that disability payments from an employment-based disability plan qualify as earnings under the CCPA. For more information see the Department of Labor's Fact Sheet #30: Wage Garnishment Protections of the Consumer Credit Protection Act (CCPA).

Social Security Disability Is Protected

It's important to distinguish disability payments from a private company (for example, disability payments that your employer pays) from Social Security disability. Social Security disability earnings are protected from garnishment. Federal law provides automatic protection of two months of benefits if the benefits are directly deposited into your account.

However, you must be careful not to commingle Social Security funds with other funds in your bank account; otherwise, you could put your Social Security at risk.