Under a decision made by the United States Treasury, many residents of New York and elsewhere who are currently receiving federal benefits and who additionally owe child support could end up losing 100 percent of those benefits starting in 2013. The decision appears to be an unintended side effect of the Treasury's decision to begin paying all benefits electronically. Those benefits include Social Security disability benefits, veterans' benefits, and benefits from other Social Security programs.
Under current law, states are allowed to freeze the bank accounts of those who fail to pay their court-ordered child support. That is why many who are in this position opt to receive their federal benefits via paper check. The state can still garnish 65 percent of that check to satisfy the back-due debt, but the recipient can freely cash the remaining 35 percent.
However, the Treasury's decision would remove that option and force all benefits to be paid electronically. That means that for a New York resident whose bank account is currently frozen for failing to meet their child support obligations, they would be unable to access their benefits. In effect, thousands could be deprived of their only means of income.
Unlike many other programs, Social Security disability is available only to those who are unable to work due to either an injury or illness. If states are able to seize the entire amount of their SSD benefits, then the recipient may well be left destitute. For the time being, though, the Treasury decision does not go into effect until March 2013, and the issue certainly bears watching for any change in the Treasury's position on the matter.
Source: The Washington Post, "Poor who owe child support could lose federal benefits," Feb. 26, 2012