Topic: Bank and credit union don't seem helpful on protecting social security income

[mako5562]

In about a month, I go for my small claims court hearing, for the Motion to Compel Arbitration on a credit card debt the JDB alledgedly purchased from Chase.

Have been reading case law like ATT v Concepcion and FAA in preparation for court day among other things.

Decided to go a different route, for a day, and assumed judge denied my MTC Arb and the JDB got a judgement on me for around $5k of alleged credit card debt.

I know enough about state bankruptcy exemptions, to know I am considered judgement proof; the question is will I be able to prove it to whom it may concern so none of my assets or income would be garnished illegally

I am on Social Security Disability and also work part-time, both of which are exempt income under state and federal bankruptycy exemptions. I currently receive my social security check in the mail(and not direct deposit) for obvious reason there is no way anybody can garnish this income.

However Social Security is changing it rules and requiring every recipient to engage in Direct Deposit to some sort of account by around March 2013. This means my social security income, once deposited in an account could legally or illegally be garnished.

I decided to do something interesting, yesterday, in preparation for learning how to let a bank know I am on SSDI, and to request for them not to have this income seized or garnished if a party attempts to do so; I became quickly educated here in New Hampshire, how a bank and a credit union I interviewed, had no intention or understanding that my social security funds need to be protected if I used their banking facilities for a direct deposit account.

I first went to a major bank and informed them of my wish to open a bank account for direct deposit of my social security check and no other income would be deposited in the bank account so there would be no mistake of what funds I am asking to be protected. The bank rep called his legal dept(in another state no less) and was told if a garnishment order comes through on my account, it would be seized and they never heard of an exception to protect social security funds.

This of course was a major disappointment in my day and somewhat of a surprise. I was under the impression that FDIC  was putting pressure on banks to tag social security funds to protect individuals from ruthless garnishment. Apparently, the message has not got out or is poorly communicated.

At this point, I decided to take a different avenue in questioning a local credit union regarding the same issues. I must admit, the woman I spoke to was more warm and understanding; she also called her legal dept who handles attachments. Unfortunately, she was told the same thing; if a legal order comes through to attach my social security account, it would be seized even though I have informed this credit union that the funds in the account are from social security disabilty.

Am I naive or is there something very wrong here? The laws state one thing, but the banks seem to just obey the garnishment order no matter what.

It seems if I were ever to get a judgement on me, my best chance of preventing garishment of the bank account containing my social security funds is to deal with the court directly and letting the judge and opposing party know of protections through fed and state bankruptcy exemptions.(I guess obviously called a debtors exam)

I am almost tempted, at this point ,to call somebody in FDIC and ask why banks are not be held responsible fot protect public assistance funds according to statutes.


I believe in the state of NY, no bank accounts can be garnished for the first $2500 of funds whether SSDI or other income. Perhaps I should look into opening an account with a NY bank(although the protective NY statute is probably for NY residents)

Any comments or insight here on DB would be most appreciated

[CleaningUp]

I believe that the Government-check-to-checking-account plan has several basic functions.

  1.  To make it less expensive for checks to be processed.

  2.  To make sure the funds are available to the recipient on the date specified. And.

  3.  Identify the proceeds in the recipient funds as non-attachable funds. 

Government, here, is not being as big an ogre as you might think.

[mako5562]

Your item number 3 is the issue here of course.

According to the communication from a bank and a credit union, just yesterday, direct deposit of social security funds would be attached without hesitation if there was an attachment ordered by a judge; Another words I think what the legal dept of the bank is saying is they do not want to be in contempt or defy a court order.

Of course, I admit, my situation here does go out on a limb somewhat, because it would be a big question if a judge would actually order to seize an account knowing it is non-attachable social security funds.

With a naive social security recipient and a ruthless creditor, who knows how often this may acutally occur, since banks don't seem, in my state anyway, to offer a "check and balance" against illegal attachment of public assistance.

I have also read somewhere, possibly in the state of NY, there is actually such thing as a pre-judgement garnishment. That I found totally bizzarre. A creditor actually attaches someone's property before a court date acually occurs.(taking someones property before guilt or innocence is determined, seems quite off the wall)

To get back to our topic here, it is not the government here I am concerned about. It is the institution called banks which hold government proceeds intended for public assistance; I saw no sign of caution, by a bank yesterday, regarding obeying an order to hold and seize public assistance funds.

Perhaps communication with someone in FDIC might eliminate confusion here for someone like myself and the banks also.

Well I don't mean to answer my own question here, but I just found this on the internet which means the bank people I spoke to yesterday apparently do not know what they are talking about. Here is what I just bumped into:

http://www.allsup.com/personal-finance/financial-planning/protecting-ssdi-benefits-from-creditors.aspx

another good source here is:
http://www.cleveland.com/business/index.ssf/2011/05/creditors_restricted_on_freezi.html

Protecting SSDI Benefits from Creditors 
In most cases, federal law makes it illegal for creditors to touch your Social Security Disability Insurance (SSDI) payments without your permission. This is also true for Social Security retirement benefits, Supplemental Security Income (SSI) and many other federal benefits.
 
The big exception to this rule is the federal government itself. The government can hold back a portion of your SSDI payments to make up for taxes or other debts you owe to the federal government, as well as unpaid child support or alimony.
 
What happens if a creditor tries to seize a bank account where I deposit my benefit payments?
If you have defaulted on a debt, your creditor or a debt collector may get a court order to take money from your checking or savings account to pay the debt. This court order is called a garnishment order. Debts can include unpaid credit card bills, utility bills, medical bills or loans.
 
If you have any Social Security payments in the account, the creditor cannot legally take these funds. Federal rules require that your bank or credit union take some steps to identify and protect the Social Security funds in your account.
 
Here’s the bottom line: Your bank or credit union must automatically protect any Social Security payments that were electronically deposited into your account during the last 60 calendar days. If you have any Social Security funds in your account beyond that amount, you’ll have to prove it to the court to get the rest of your money back.
 
Here are the details of what your bank or credit union is required to do:
When your bank or credit union receives the garnishment order, it has to determine if any federal benefit payments were electronically deposited into your account during the last 60 calendar days.
Then, it has to make sure you have access to a “protected amount” of your funds. The protected amount is the sum of the federal benefits deposited into your account during the 60-day window. Or, if your balance is less than the sum of these payments, the protected amount is the remaining balance of your account. You may use these funds as you normally would. The idea is that you should have about two months’ worth of benefits to live on.
If your account contains more money than the sum of the benefits deposited during the 60-day period, these funds are subject to the court order. They may be frozen or turned over to your creditor. If you think that these additional funds are also federal benefit payments, you will have to follow a legal procedure to get this money back.
 

What is really frustrating and confusing is the legal dept of the banks or credit unions I spoke to, apparently have no clue of the above federal rules and regulations passed in May 2011

[howucantoo]

Have you checked to see if SS department issues pre paid debit cards ?

Think I read somewhere that option is or will be available.

[Spacecadet12364]

With direct deposit, of any type let alone government payments such as social security disability and such, it should be coded as to where the deposit is coming from.

For example, like one we get in has "SSA TRE SSA TREAS XXX (XXSOC SEC)". The set of x's after treasury in ours has a set of numbers there. I did not use the numbers
in case its part of a type of personal identification. It is probably something to do that indicates what type of Social Security payment it is. And that is the only money
that goes into that account. I get another type of non-garnishable income that goes to a different bank, and it is coded in a similar fashion to indicate the source
of the deposit.

You may want to take what you came across regarding the non-garnishability of those funds and talk directly to your bank/credit union.

[nobk4me]

I would recommend looking into the Direct Express debit card, on which the government will deposit Social Security benefits.

[mako5562]

I did note and see the Direct Express Debit Cards.

However, my question is on this topic:

I read on DB, prepaid visa cards sold by private companies are NOT a protection against garnishment. If a creditor somehow finds the account with the prepaid visa account, it can be attached

What I am getting to is the concept similar with the "Direct Express Debit Card"(I wonder if this can be attached if the creditor has knowlege of where the SS funds are going to)

The other issue I would say is there is probably a fee everytime you make a withdrawal on the DDC(Direct Debit Card)

[Fighting Irish]

If you really want this issue to get attention in your state, contact the local "consumer watchdogs" for your television news stations and your largest newspaper.

Ask them to look into it.

Poor, broke grandma getting her Social Security ceased, because Heartless Bank can't be bothered to obey federal law is news.

And Heartless Bank (and, even more, Credit Union) will act swiftly to stop that kind of press.

[CleaningUp]

Be careful. 

Poor, broke, put-upon grandma may figure out that all of the attention she got was not worth the relief.

[Twingles898]

The Direct Express Debit Card has no fee on the initial withdrawal from a credit union.

Each withdrawal after that has been $1 or less depending on which credit union has been used.

[mako5562]

Both FightingIrish and  CleaningUp; you both raise some interesting scenarios and at this point, I would not be sure to play it out in a public manner. Certainly, if my funds were actually stolen from me rather than the current "What-If scenario", I would become  most aggressive and probably hit with any and all missiles.

My current tentative plan, would be to go back to the same bank personel now, with the sources of articles I found on the internet regarding the new federal rule initiated in May 2011; I would like to see both the bank and credit union reactions post-informed of this federal rule.(I suppose I might get a different response with perhaps a letter in the mail)

I am wondering if the legal depts, that got my inquiry, were just unqualified lower level soldiers, or the information pathway from the fed gov to banks and credit unions are just poorly communicated channels.

I am sure outfits like "Legal Aid for the poor" know about the federal rule.

I would imagine a threatening letter from an attorney to the bank that the "SS FUNDS should be returned immediately to my client or else a major lawsuit would ensue" would get it straightened out, pretty quickly.

If I have the time, it would be certainly interesting to test other banks in the area to see if awareness and obedience of the federal rule is being pursued.

I imagine, another option I have, is to contact my state senators or the banking commisioner's office, on why this federal ruling here is being ignored or there is a lack of awareness.

I'll tell you what, for me and anybody here on DB that is on public assistance(SSDI or SSI), I feel like I can sleep a whole lot better at night knowing there is a federal rule that makes banks responsible to mark or tag federal public assistance to recipients, and absoulutely protect it from garnishment even if there is a court order for garnishment.(I would say if the banks and credit unions commit an error on this, they suddenly  have a big legal problem they will be facing backed by this federal rule)

[CleaningUp]

The new FDIC rules were put in place in late 2011.  They may have yet to filter to hirelings at the front desks.

The best way to protect one's  interest is to put people on notice.  In this instance, the bank.

What's wrong with putting a formal letter in the banks hands that states that Acct No. 9999999999 contains only funds that a derived from SSI or SSDI and are therefore exempt from attachment of any kind?

What's wrong with putting a formal letter in the bank's hands that states that the first $9999 in Acct No. 9999999999 is exempt from attachment by state statute <reference state statute and statute amount>?

By putting them on notice, they get to chose between complying with the law and complying with the law.

If you have to end up in court to get your money back, you have hard evidence that the bank knew it was violating the law...one way or the other.

[mako5562]

Thank you for your answer on a method to notify a bank beforehand, their potential behaviour and actions would be in violation of several laws, if they choose to go that route.

I would guess, eventually, banks will get educated to the new fed rule and own up to proper procedure for prevention of garnishment on SS funds, which are tagged already via electronic deposit.

I myself, have just learned, the fed rule only protects one if you use "direct electronic deposit" to the bank account.

[NotBonJovi]

Additionally, judgment owners send out information subpeonas to judgment debtors. These subpeonas often ask the judgment debtor to identify the source of their income, be it SSDI or other forms of exempt income.

The reality is, mako -- you can take all precautions necessary, and still end up with your account frozen. The upside of that is that you will likely be able to unfreeze it rather quickly, and rack up some violations in the process.

While it's best to cover oneself the best they can, there are simply no guarantees. Ever.

[Fighting Irish]

+1.

It's imperative to know your rights.

It's also important to realize that alleged creditors are more than happy to violate them, because they're used to getting away with it.

The nice thing about knowing them, even in the face of a violation, is that you can then turn around and sue them.