Managing Debt

New Federal Rule Protects Benefits from Garnishment

Comments 38 Comments

A new rule protecting certain federal benefits from garnishment became effective May 1, 2011. The regulation, titled, Garnishment of Accounts Containing Federal Benefit Payments, is important because it will help protect the elderly and disabled, among others, who receive federal benefits from having that money taken from their checking or savings accounts by creditors.

What is Protected?

Federal law protects certain types of Federal benefits payments from creditors. These include Social Security benefits, Supplemental Security Income (SSI) benefits, VA benefits, Federal Railroad retirement benefits, Federal Railroad unemployment and sickness benefits, Civil Service Retirement System benefits and Federal Employee Retirement System benefits. Under Federal law, these types of funds are protected from garnishment by judgment creditors.

What is Garnishment?

If a creditor successfully sues a debtor to collect a debt, it will be awarded a judgment. A judgment creditor may be able to try to collect the judgment by taking or “garnishing” money from the debtor’s bank account. State and federal laws restrict garnishment, and some income—the types listed above, for example—are protected. In most cases, a creditor must first get a judgment before garnishing funds, though there are some exceptions, such as student loans.

Why is This Rule Needed?

Financial institutions who receive a garnishment order often place a freeze on the debtor’s account, and may send the garnished funds to the court or creditor. That may include money that should be protected. The debtor is then left without access to the funds needed to pay essential bills, and must then try to prove which money in the account that was frozen or taken is exempt.

What the New Regulation Does

A financial institution that receives a garnishment order will now be required to review the debtor’s account history during the previous 60 days. If, during this ‘‘lookback period,’’ one or more exempt payments were directly deposited to the account, the financial institution must allow the account holder to have access to an amount equal to total benefits received during that period, or the balance of the account on the date of the account review, whichever is less. Financial institutions will also be required to provide account holders with a notice of their rights.

To help financial institutions identify which funds are protected, there will be a tracking code attached to direct deposits of certain federal benefits. Benefits payments received by check are not covered by this regulation because they can’t be identified using these tracking codes. While those funds are still protected from garnishment, recipients may run into the old problem of having their accounts frozen first, and trying to assert their rights later.

This regulation does apply to accounts that are jointly held with someone else, and it also applies to multiple accounts, if a debtor has more than one account with a financial institution.

What It Doesn’t Do

It does not protect funds from garnishment to collect child support or money owed to the U.S. government. It doesn’t protect all benefit payments that may be exempt, such as military retirement payments, and certain payments made by the Army, Navy, Air Force, Marines, Coast Guard, National Oceanographic and Atmospheric Administration and the Public Health Service. (That may change in the future.)

It also doesn’t protect funds that have been transferred from one account to another. If, for example, a debtor’s Social Security check is deposited into his checking account, but he later transfers that money to a savings account, this regulation no longer protects it. (Again, the funds may still be exempt from garnishment, but the debtor may find himself with his account frozen, trying to prove that the funds should not be garnished.) And it only protects sixty days’ worth of direct deposit benefits payments.

What You Should Do Next

If you receive income from federal benefits and are having trouble paying your bills, be sure to get help. Talk with a consumer law attorney or bankruptcy attorney to find out how to protect your money and assets, and resolve your debts.  If a debt collector threatens to garnish income received from any of these protected sources, such as Social Security income, talk with a consumer law attorney immediately. The debt collector may be breaking the law.

Image: Kevin Cortopassi, via

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  • Joyce Morgan

    This information was very helpful as i am thinking about applying for my ss benefits at 62. I have been unemployed since 2008 and the ss benefits will be the only income I have if I can’t find another job.

  • http://centurylink manny

    i have a question i dont know if you have an answer. i have a judgement for over 48,000 dollars for overpayment of alimony from my ex. she receives labor and industries disability benefits. is there some way i can recover my losses from her benefits? either from state or federal law?

    • Gerri Detweiler

      I am sorry Manny – no idea and not even sure where to check.

  • Nana

    Am I protected if I have an auto loan and am behind on my payments? Bought the car when I was still employed but due to illness stopped working. . .am 65 and living on social security benefits. Am I protected from this creditor?

    • Gerri Detweiler

      Nana –

      If you fall behind on your car payments your car can be repossessed. I am not aware of any special protection against repossession because you are on SSI. I’d suggest you talk with a bankruptcy attorney as she or he may be able to help you figure out a way to keep your vehicle.

      • Nana


        Have tried that but am told that my debt does not exceed the amount required to declare bankruptcy. Then again, I do not have the money to pay for attorneys fees.

        I sincerely thank you for your professional response.


  • Charles Phillips


    I am facing a crisis. I am a 65 year old male and will be 66 in September. I am presently recieving Social Security and a small VA monthly pension. The Dept. of Education is threating to garnish my income by the end of this month. I don’t really know what I’m going to do. If what you said is true, what can I do to stop them? I was not able to find work after graduation.

    Cordially yours,

    • http://dontknow Mickey fin

      @Charles: I’m in my late 60 s , i Had to retire, wife has ilness, I still owe Over $9000 on a car. My only benifits are my Viet Nam disability and my retirement ssi both of which are federally protected under title 31. Just google on line “what Federal benifits are protected”. You will have all your answers there.

      Your benifits are protected but know all your rights. I’m presently writing a letter to give to my bank about Federally deposited funds and how my funds are protected. Be preeemptive. Don’t wait ffor them to tell you:). You need to be able to critique them.

      When i deliver my letter they are on notice that a garnishment may be in the works and to adhere to the Federal law. I’m going to the bank first however to speak in person to ask what there internal policys are in regaurds to identifying funds that are federally protected. Then my letter will point out to them my funds are protected under title 31 may 1st 2011. That way when the garnishmet come to them they are all ready on notice so they don’t just lock up my account. You are allowed to acess of your funds equal to the federal depossits in that look see month. Hope this helps:).

      • Gerri Detweiler

        Mickey – I agree it’s wise to be proactive and not take chances.

        Charles – Your Social Security income may be at risk of an offset for defaulted federal student loans. You’ll find some good information on your options here.

  • Nana

    Gerri: As you said, my car is up for repossession!!! Can I file bankruptcy to keep from getting my repossessed? Which is the best bankruptcy chapter to file, 7 or 13?

    • Gerri

      Nana –

      I am a bit confused here as you said earlier you’ve met with a bankruptcy attorney and it isn’t a good option for you. In general, you need the assistance of a bankruptcy attorney to help figure out whether you should file Chapter 7 (straight bankruptcy where you wipe out most or all of your debts) or Chapter 13 (where you pay back some or all of your debt over time.)

      Is your car worth more than you owe? If so another option may be to sell it and try to get something cheaper. You could also try talking to the lender to find out if they will let you renegotiate the loan with lower payments, but that’s not always easy to do.

      Sorry to hear you are going through this – sounds like a tough situation you are in..

  • Roger J. Champagne

    could you please tell me what the U.S. code & cfr that protects my V.A. & S.S.I. from a garnishment ?

    • Gerri

      Roger, you’ll find more information here and here.

  • dee

    What good is this protection if gov pension/ssa money can be taken 60 days after it enters your bank account?

    • Gerri Detweiler

      Dee –

      For many types of debts your Social Security and government pension are safe from garnishment or seizure by creditors. This rule doesn’t mean that income is fair game after 60 days. It just adds another layer of protection by requiring banks to investigate first.

      (Not all government payments are protected though, and some are at risk of being garnished if you are in default on a federally insured loan.) Consumer law attorneys have told me that one of the ways to help protect that income is to keep only those exempt funds in a separate account. If you receive other income, you may want to deposit it in a different account.

  • http://new&advice nydia dockery

    I have been looking fore the new law on your credit protection new laws

  • Auditor

    If an account has $2000 in protected funds in the lookback period and $2000 in unprotected deposits for the same period and the current balance is $1500 – would any of those funds be available for a tax levy or garnishment? Nothing I’ve looked at addresses regular deposits.

    • Gerri Detweiler

      Yes, my understanding is that the unprotected funds would be at risk. However, I am not an attorney so I recommend you contact a consumer law attorney if you have questions about your specific situation.

  • Early retiree

    I am now receiving FERS federal employee monthly retirement benefits. I have defaulted on several thousand dollars worth of credit card debt and am considering bankruptcy. If I don’t file bankruptcy and eventually get sued, can my monthly federal retirements be garnished? I am hearing different things from different people, including attornyes. No one seems to know much about this area of the law. Please advise. Thanks.

    • Gerri Detweiler

      This definitely is a question a consumer bankruptcy attorney should be able to answer. If one you consulted can’t, I would try another. Having said that there are a few resources that state the ability to garnish this income for consumer debts is limited. Check here and here.

  • Credit Experts

    TJ — this is a complicated case and unfortunately, we’re not attorneys. Because you’re dealing/fighting with another attorney, you really need the advice and experience of a lawyer. In some cases, attorneys will offer free consultations or work on a contingency basis if you have a strong case. To find a consumer law attorney in your area, is a good place to start.

  • Al

    Just wondering if it is standard procedure that government tuition checks for adults community college can be garnished even if the child is an adult and had been emancipated for back child support?
    Checks come every 3 months

    • Gerri Detweiler

      I am sorry but I don’t know the answer to that question.

  • Gerri Detweiler

    Without all the details it’s hard to tell but one thing you can do is to contact a consumer law attorney (visit for a referral). The other thing you could so is file a complaint with the Consumer Financial Protection Bureau. If you go the latter route be as specific as possible.

  • Gerri Detweiler

    According to the Defense Finance and Accounting Service the answer is “No. Retired military members’ pay is exempt from garnishment for commercial debts. Under the Uniformed Services Former Spouses’ Protection Act, child support, spousal support, or a property division are allowable.” Hopefully though you have talked with an attorney about protecting your own interests.

  • Charles Woolfolk

    Hi, If I transfer my lump sum ssd payment into a saving account can a creditor garnish it?

    • Gerri Detweiler

      If you transfer the funds from the account in which they were deposited into originally, the bank can’t flag that and protection isn’t automatic. You can still claim the protection but the funds may be frozen in the meantime. I’d suggest you consult with a consumer bankruptcy attorney to find out how to best protect your assets.

      • Charles Woolfolk

        Thank you!

  • Gerri Detweiler

    It may not be. I am not sure whether the state of California can go after military retirement pay. My guess is no, but you’re going to need to investigate to find out for sure . And it sounds like he really needs to close this account and open account in his own name to protect his future payments. He is going to have to start making some calls (take good notes) to find out what his rights and options are here.



  • Gerri Detweiler

    Have you talked with a bankruptcy attorney? If not, I would recommend you do so. The problem with a judgment is that interest may continue to accrue and the balance may keep getting larger. At some point if your finances improve, they may try to collect that larger amount. The attorney should be able to help you figure out whether it makes sense to try to file for bankruptcy to get rid of this or to wait. If you need help finding an attorney, the website for the National Association of Consumer Bankruptcy Attorneys can help.

  • Gerri Detweiler

    I spoke with Connecticut Bankruptcy Attorney Eugene Melchionne who says that “Social Security money is protected by Federal law as long as the source can be verified.” It can be “tough when money is commingled with other cash that might not be protected like spouse’s earnings, etc.”

  • Gene Melchionne

    The debit card is just like any other bank account. It can be seized by a court order on a creditor’s judgment. However, if you can prove that the only money in the account comes from Social Security then it may be protected, except maybe the government itself. See the links provided lower in the comments. avoid commingling this “safe” money with other sources of income this is not protected at that may result in a loss of the protection.

  • Gerri Detweiler

    I responded to a similar question yesterday. I spoke with Connecticut Bankruptcy Attorney Eugene Melchionne who says that “Social Security money is protected by Federal law as long as the source can be verified.” It can be “tough when money is commingled with other cash that might not be protected like spouse’s earnings, etc.” Since these funds are not comingled with other funds that shouldn’t be an issue.

    And according to the National Consumer Law Center: The Direct Express card is safer because it cannot be frozen except for child support, alimony, and debts to the federal government like taxes and student loans.

  • Gerri Detweiler

    Glad we could help!

  • Gerri Detweiler

    If the debt is outside the statute of limitations you can show up in court and raise the statute of limitations as a defense. In addition you may want to talk with a consumer law attorney now – the collector may be breaking the law by suing you for an old debt. Whatever you do, don’t just ignore the lawsuit. If you do they will get a judgment against you and while you may be judgment-proof now, that could change in the future. At a minimum it will create hassles for you since judgments remain on credit reports for a very long time.

    And no – you can’t be required to pay an old debt with your current credit card.

  • Credit Experts

    Tim —
    It is better to make sure you are not commingling money that is exempt with money that is not. Separate accounts would be a much better idea.

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