Protections for Social Security Funds in Bank Accounts

If you have Social Security money deposited into a bank account, it might be protected from judgment creditors.

If you have Social Security money deposited into a bank account, it might be protected from judgment creditors. This is especially true if you use the direct deposit option for your Social Security benefits. Thanks to federal regulations, Social Security funds that are directly deposited into your account get special protection from garnishment by judgment creditors. Read on to learn how those protections work (To learn about other ways that judgment creditors can go after your income and assets, see How Creditors Enforce Judgments.)

When Social Security Funds Are Protected

Judgment creditors can garnish or levy funds in your bank account in order to collect on their judgments. But if those funds came from Social Security, the judgment creditor is limited in what it can do.

Under the law, Social Security funds are exempt, or protected, from garnishment and other actions taken by debt collectors. However, if your Social Security funds are not direct deposited into your bank account, or if you transfer the funds into another account after they are received, the protection is not automatic. A creditor can still have your account frozen by serving the bank with a garnishment or attachment and, if you don't respond to claim your exemptions, the funds can still be paid over to the creditor. Even if you do assert your exemptions, the funds will remain frozen and not accessible to you until the matter goes before judge for a ruling on the claims.

Protections for Direct Deposit of Social Security Benefits

Under federal regulations, if a bank receives a garnishment order from a judgment creditor, it cannot freeze money that came from Social Security benefits (or benefits from certain other government sources) if the government deposited the benefits directly into your account within two months prior to the garnishment order. This shifts the burden to your bank to ensure that you have access to two months worth of Social Security benefits. Exceptions exist for garnishments or attachments for past due child support and federal taxes.

The Bank's Duty to Review Your Account

Here's how it works. When the bank receives a garnishment or attachment order, the bank has two business days to conduct a review. It must identify your accounts and then determine if the garnishment order is to collect child support or federal taxes. If so, the bank may freeze your funds, even if they come from Social Security.

The Look-Back Period

If the the garnishment is not for child support or federal taxes, the bank must review your account history for the two months preceding the receipt of the garnishment order. This two month time frame is called the "look-back" period.

Social Security Funds Deposited in the Look-Back Period

If the account history shows that Social Security or other protected government benefit funds were electronically deposited directly into your account within the look-back period, the bank must protect the funds in that account up to the total of the direct deposits.

If the balance in the account is greater than the total of the direct deposits, only the excess can be frozen in response to the garnishment order. An amount equal to the direct deposits during the look-back period must remain accessible to you.

If the balance is less than the total of the direct deposits, the account cannot be frozen at all.

The Bank Must Review Each Account Separately

The bank must review each of your bank accounts separately. That means that if you have money in an account that Social Security funds are not directly deposited into, the bank cannot protect these funds even if you transferred some of your direct deposit Social Security funds into that account after they were received. The bank is not required or permitted to trace the direct deposited funds to other accounts.

But the rules can work in your favor as well. The bank must simply protect the balance in the account receiving direct deposits, up to the total of the direct deposits made during the look-back period. It does not matter whether the funds in the account at the time the garnishment order is received are part of the Social Security direct deposits or from a different source entirely.

The Bank Must Notify You of Its Determination

Once the bank completes its review of your accounts, it has three days to send you a notice informing you of the garnishment and providing you with the results of its review (in some situations it may have more than three days). If there are unprotected funds, however, the notice period will not delay the freezing of the unprotected funds.

The notice must provide the following information:

  • that a garnishment order was received
  • the date the order was received
  • a brief explanation of garnishment
  • an explanation of the bank's responsibility to protect federal benefit payments direct deposited during the look-back period and keep them accessible to the account owner
  • the account that received direct deposits and which may be subject to the order
  • the requirement that the bank freeze any unprotected funds in the account, if any
  • the amount of any garnishment fee (to be paid from unprotected funds)
  • the protected deposits identified during the review
  • how you can assert other exemptions in the garnishment action to try to protect any funds that the bank must freeze
  • your right to consult an attorney or legal aid service for assistance, and
  • the name of the creditor who obtained the garnishment order and contact information, if available.

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