Expert Q&A

Bank must shield your Social Security money from garnishment


A reader’s bank account, which only contains Social Security funds, has a levy against it despite a new law that requires banks to make sure those funds aren’t touched

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Question for the expert

Dear Credit Care,
My bank account has been levied. There is only Social Security in the account. The levy was generated by collection lawyers for a major credit card. I know Social Security benefits are exempt, but will my bank stop the levy on these funds? — Linda


Answer for the expert

Dear Linda,
Yes, thanks to a new federal regulation that became effective May 1, 2011, your bank must protect Social Security benefits in your account from being frozen by a court order to garnish the funds.

Your bank (and all other financial institutions) is required to issue you a notice outlining the actions taken regarding your account and the order to garnish the funds in the account. The bank is also required to protect any deposits of federal benefit payments from the following authorities: the Social Security Administration, Department of Veterans Affairs, Railroad Retirement Board and Office of Personnel Management. The amount protected from garnishment is based on an account review and look-back period of two months. Once the bank receives the garnishment order to levy your account, it establishes an account review date of no more than two business days from the date of the order. The look-back period is then set to be the two months prior to the account review date. Federal benefit payments deposited during the look-back period are protected from garnishment.   

For example, if the bank establishes the account review date as June 26, the look-back period would be from June 25 to April 25. And let’s say that during the look-back period you received two direct deposits of federal benefits in the amount of $2,000 each — for a total of $4,000. The bank must protect any amount in your account of $4,000 or less from garnishment. If you have more than $4,000 in the account at the time of the review, any funds above the protected amount would be eligible for garnishment, depending on any state laws that apply. You can learn about your state’s laws by contacting your local consumer protection office. A list of state and county consumer protection offices is provided at the Federal Citizen Information Center‘s website .

There are two more things to keep in mind. First, the federal benefits protection applies only to funds that were direct deposited into the account. (This should not be an issue for you, as Social Security benefit recipients were required to have direct deposit or a debit card for benefits by May 1, 2011). Second, if any of your federal benefit payments are later deposited into a different account than the account into which it is direct deposited — say, a savings account — the protections no longer apply.

In addition, if the creditor seeking a garnishment is the federal government or a state child-support agency, the federal benefits may still be eligible for garnishment. The Treasury Department provides this toll free number — (800) 304-3107 — where you can learn if any federal money due you can be withheld to repay debt.

Handle your credit with care!

See related:What types of payments are exempt from garnishment?, The truth about Social Security and wage garnishment, New rule protects exempted funds from garnishment orders

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