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.

By , Attorney (University of Miami Law School)

Judgment creditors can usually levy funds in your bank account to collect on their judgments. But if those funds came from Social Security, the judgment creditor is limited in what it can do. The money might be protected—especially if you use the direct deposit option for your Social Security benefits.

Thanks to federal regulations, two months of Social Security funds that are directly deposited into your account usually get automatic special protection from garnishment by judgment creditors.

When Social Security Funds Are Protected

Under the law, Social Security funds are exempt (protected) from garnishment and other actions taken by debt collectors. But if your Social Security funds aren't directly deposited into your bank account, or if you transfer the funds into another account after they're received, the protection isn't 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 to the creditor.

Even if you assert your exemptions, the funds will remain frozen and not accessible to you until the matter goes before a judge for a ruling on the claims.

Protections for Direct Deposit of Two Months of Social Security Benefits

Under federal regulations, if a bank receives a garnishment order from a judgment creditor, it can't 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 you have access to the Social Security benefits you received in the previous two months. (Exceptions exist; for example, to recover unpaid federal taxes, defaulted federal student loan payments, child support obligations, alimony, or restitution to a crime victim.)

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 determine if the garnishment order is to collect child support, federal taxes, or one of the other exceptions mentioned above. If so, the bank may freeze your funds, even if they come from Social Security.

The Look-Back Period

If the garnishment isn't for child support, federal taxes, or one of the other exceptions mentioned earlier, 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 can't be frozen at all.

The Bank Must Review Each Account Separately

The bank must review each of your bank accounts separately. So, if you have money in an account that Social Security funds aren't directly deposited into, the bank can't protect these funds even if you transferred some of your direct deposit Social Security funds into that account after they were received.

The bank isn't required or permitted to trace the directly deposited funds to other accounts. But you might be able to assert exemptions in the garnishment action to try to protect any funds that the bank must freeze.

And 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 doesn't 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 might have more than three days). If unprotected funds are in the accounts, 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 might 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.

Talk to a Lawyer

Consider talking to a debt relief lawyer if you have questions about garnishment.

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