What benefits are exempt from garnishment?

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also wrote for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs.

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Dear To Her Credit,
I worked and lived in Oregon. I was fired last June. I collect Oregon unemployment and Social Security benefits. Can either be garnished for credit card and hospital bills? -- Jane

Answer for the CreditCards.com expert

Dear Jane,
The short answer is "no." Most creditors cannot garnish either unemployment or Social Security benefits. Even if they could, by the time you take an exemption for basic living expenses from your benefits, there likely wouldn't be anything left for them to take.

No one can directly garnish your Social Security check. However, in the past, once that money was in your bank account, it was up to you to prove which funds came from where and to prevent your benefits from being taken or try to get them back. Many people with no financial backup plan found themselves temporarily penniless while they sorted it all out.

Thanks to new federal regulations, as of May 2011, the burden has shifted from you to your bank. Before the bank (or other financial institution) freezes your account, it must make sure electronically deposited benefit payments are left untouched and that you can still access them.

One catch is the phrase "electronically deposited." In the past, I've told people in any danger of having an account garnished not to have benefits and other types of income deposited electronically. It was better for them to physically get a check and either cash it or to make sure the bank knew it was protected income.

The game has changed. If you get benefits in the mail and take the check to the bank and deposit it, you're not protected by the new law. That's because the electronic deposit is tagged electronically by the bank. It doesn't work for checks. My advice now is to always have exempt benefits electronically deposited into your account.

With your benefits safe, you can relax, step back and take a look at your financial picture. The credit card company and the hospital may not get your bank account, but that doesn't mean your debts go away. Debts are like weeds; the more you ignore them, the faster they grow.

You no doubt have other hopes and goals that take money, too, whether it's sprucing up the kitchen, visiting family or just the security of having backup cash in the bank. People sometimes focus solely on debts when they think about finances. That's a mistake. We all need positive things to motivate us to keep moving forward!

If your health permits, try to find a way to make a better income. You must be looking for work to be collecting unemployment benefits. It's a tough economy, but even now people are finding jobs. If you can't find a job, consider offering a service or selling something. Surprisingly, it's still hard to find people for simple projects.

Halfway between a regular job and striking out on your own is the option of temporary work. These can be seasonal, but more and more jobs are offered on a three-month contract as a matter of course. If you widen your job search scope, you'll increase your odds of finding something soon.

Unless your total debt is very high -- probably over $50,000 in your case -- I don't recommend bankruptcy. Your debt appears to be uncollectible, but to file for bankruptcy, you have to pay legal and trustee fees. The cost in time and money is too high, especially when you have other options.

Have you applied for charity help with your hospital bill? Hospitals routinely write off bills, based on the income level of patients. It's not going to happen unless you ask, though, and you should ask before too much time goes by. Go to the patient accounts department and ask if you can apply for financial assistance. If you have no assets and are living on nothing but government benefits, you should qualify for help.

You can also get help sorting out your finances from a nonprofit agency affiliated with the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. You can also attend a local personal finance class, or ask a trusted friend or relative to look over your situation with you.

First, make sure your benefits are safe. Then, start planning for a brighter financial future. It's never too late to take care of yourself -- and your credit.

See related: Wage garnishment and unemployment, Can Social Security benefits be garnished over card debt?, New rules force banks to protect funds from garnishment, After medical bills lead to wage garnishment, consider bankruptcy

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Updated: 10-16-2018