If you are past due on a debt and a debt collector has sued you and gotten a judgment, it can get a court order to garnish your funds. This means money can be taken from your bank account or prepaid card. However, certain federal benefits are protected from being garnished or frozen if they are placed into your account by direct deposit.
This automatic protection comes from a U.S. Department of Treasury rule. There are several different kinds of government benefits protected by this rule, including Social Security Disability Insurance, Supplemental Security Income, Veterans benefits, Civil Service Retirement System, Federal Employee Retirement System, and Federal Railroad unemployment, sickness, and retirement.
How Does the Rule Work?
If a debt collector tries to garnish money from your account, your bank or credit union must check to see if any of these kinds of benefits were direct deposited into your account during the last two months. If so, the bank must protect funds that are equal to two months of the specified benefits. If you have funds exceeding two months of benefits, they can be frozen or garnished. If the extra funds are exempt from being garnished or frozen by federal law, you can go to court to request your funds be released. Many people use a prepaid card rather than a traditional bank account. If benefits are direct deposited or loaded onto a prepaid card, they have the same automatic protection as funds in a bank account.
Are There Exceptions to This Automatic Protection?
There are some exceptions to this automatic protection allowed to those who receive the specified benefits. If you owe back child support or government debts, your benefits might be garnished. As an example, if you owe federal student loans, back taxes, spousal support, or child support, your benefits might be garnished. But some benefits, such as Supplemental Security Income (SSI), are protected from garnishment even for these kinds of debts. If you get paper checks instead of direct deposit, the bank is not required to protect a two-month amount of benefits. Your entire account could be frozen. You would have to go to court to prove that your funds come from a protected benefits source.
What if Your Account Is Frozen or Garnished?
If your bank account has been frozen or garnished, you should receive a notice of garnishment that explains the court procedures for claiming exemptions and getting funds released. You will then go to court where a judge will decide if your money is turned over to the debt collector after looking at your income source and any exemptions on the federal and state levels. It is important to make sure the court knows if your money comes from any federal benefits programs, so the right decision can be made.
Consult With an FDCPA Attorney
If you are facing a frozen bank account or garnishment, you should consult with a FDCPA attorney. Complete our Free Case Evaluation Form on this page to get your case reviewed by a FDCPA lawyer in your area today.