The SS Act protects Title II (SSDI) and Title XVI (SSI) benefits from garnishment and claims from judgment creditors. (42 U.S.C. §§ 407(a) and 1383 (d)(1).
However, the issue arises when your protected benefits are deposited into a bank account with other funds. How can you prove which funds are protected and which are not?
Creditors and the government have been debating how to respect this rule while allowing creditors the ability to collect eligible funds. As of June 2013, this protection has been clarified and it offers even more protection to disability recipients.
The new order requires that a creditor can not obtain a garnishment order on an account until after they learn whether or not there are any federally protected benefits in the account.
- Debts owed to the US Government (taxes) and for Child Support are NOT limited by these restrictions.
Now once a financial institution gets a garnishment order; it must review the history of the account to be garnished to see if any protected benefit was deposited into that account within the past 60 days. Any money that was deposited from a protected benefit can not be garnished or frozen. This differs from the old rule where the entire account would be frozen while this was checked, keeping the account holder from accessing any of their funds.