New federal regulations provide some safeguards to protect your social security income from collection efforts from creditors. As of May 2011 new regulations became effective that provide protections against creditors levying your bank account with social security benefits. The new guidelines apply to social security and supplemental security income that is directly deposited into a bank account. Under the guidelines a financial institution must follow certain reviews and procedures whenever they receive a garnishment order for funds in your bank account. If your funds have already been levied, here are the steps you can steps you can take to to
stop a bank levy in California.
What Is A Bank Required To Do To Protect Your Social Security Benefits?
If a financial institution receives a garnishment/levy order from a creditor then they are required to complete a review of your account before they allow the levy to proceed.
- First -if the garnishment order is not accompanied by a Notice of Right to Garnish Federal Benefits then the bank needs to review your account. This notice would only be part of a garnishment order if it involved a debt for child support, federal taxes or federally guaranteed student loans.
- Account Review- the bank will review your bank accounts to determine what type of funds are in the account and co owners on the account. The bank is required to complete this review to ensure that funds that are protected under the new guidelines are not garnished or levied by a creditor.
- Protect Benefits- The bank will protect either the total of all social security or supplemental security income directly deposited into the account during the two month period from the account review or the amount that is present in the account at the time of account review (whichever is less). The bank is required to not allow the garnishment of these funds and to protect these benefits from a garnishment order.
A bank can proceed with a garnishment or levy of any funds that do not meet the requirements above.
What Can You Do to Protect Your Social Security Benefits?
- To avoid any potential issues with the identification or tracing of your social security or supplemental security income benefits it is important that you maintain a separate account for your benefits. It is important that you do not commingle your benefits with any other type of income.
- Directly deposit your benefits into your account. The regulations above only apply to directly deposited social security and SSI benefits. This should not present a problem in most cases since the social security administration is generally requiring that funds be directly deposited into an account. They are strongly urging all beneficiaries to sign up for electronic payments and requiring that people switch by March 1, 2013.
- Do not transfer social security or SSI benefits from one account to another since the protections above do not apply to social security or SSI benefits transferred to an account. The guidelines above only apply to directly deposited benefits.
- File a Claim of Exemptions-If your funds have been seized from a bank then there is a procedure you will need to follow in each state to have the funds returned to you. In California you would submit a claim of exemptions indicating that the funds are social security or supplemental security income that are not subject to garnishment/levy by the creditor. This claim needs to be done within 10 days of the notice of levy being served on you in California.
The bank or financial institution can proceed with the garnishment of funds if they do not fall in the above requirements, but this does not mean that the creditor is authorized to garnish or levy your social security or SSI benefits. The security security act protects benefits from seizure from most creditors except federal income taxes and child support (and federally guaranteed student loans in the case of social security benefits).
If you are on limited income and have outstanding credit card debt, medical bills or loans you may also want to consider filing for bankruptcy. Filing for bankruptcy will stop creditor efforts to collect from your social security benefits and SSI, including garnishing social security . Contact a local bankruptcy attorney to review your options and determine if bankruptcy is a good option in your situation.