In accordance with 11 U.S.C. 362(b)(2)(C), SSA will continue to withhold benefits
to honor a properly served order to garnish Title II benefits for child support or
alimony, even if a beneficiary files a petition for bankruptcy.
There are two scenarios that we must be aware of when considering bankruptcy in relation
to garnishment cases:
-
•
SSA is an exempt creditor; the bankruptcy petition does not affect SSA in its findings
-
•
SSA is a non-exempt creditor; the bankruptcy petition seeks to direct SSA by its findings
Status as an exempt or non-exempt creditor is listed in the bankruptcy petition.
1. If a bankruptcy petition is filed exempting Social Security as a creditor
-
•
Continue garnishment withholding and payover in the Court Ordered Garnishment System
(COGS).
-
•
Annotate COGS remarks to indicate that a bankruptcy petition has been filed for the
affected beneficiary (include the bankruptcy case number).
2. If a bankruptcy petition is filed which does not exempt Social Security as a creditor
-
•
Continue garnishment withholding;
-
•
Stop payover in COGS (see SM 00832.250 or MSOM SPECPAYSYS 003.008;
-
•
Annotate COGS remarks to indicate that a bankruptcy petition has been filed for the
affected beneficiary and that SSA is not exempted (include the bankruptcy case number);
-
•
Refer the case to the Office of General Counsel (OGC) to determine whether continued
garnishment of benefits is appropriate; and
-
•
Follow OGC’s response for guidance in how to handle the garnishment of the case in
question (for COGS manual adjustment instructions, see SM 00832.340).
NOTE: Pay particular attention to the consideration of Social Security’s status as an exempt
creditor. It is possible that a child support or alimony obligation could be considered
as part of a reorganization plan and that the bankruptcy court might attempt to address
these obligations as part of that plan. In these cases, forward the order to OGC to
ensure that double garnishment does not occur.