Mixed Up Social Security Benefits
However, the fact that creditors or collectors can’t take this type of income doesn’t necessarily mean they won’t try. In the past, it’s not been uncommon for creditors with judgments to freeze debtor’s bank accounts for weeks while trying to determine whether the funds in those accounts were exempt, warns Philadelphia consumer law attorney Michael Forbes. Forbes, who sues debt collectors, points out that new rules “now place the burden on the banking institution to determine whether or not these funds were protected from attachment. If the recipient’s bank account contains protected funds, the banking institution is now required to protect two months of benefit payments from attachment. The remaining funds can also be protected but there still remains a process (to protect those funds).”
However, if your benefit payments are deposited in an account where other money is also deposited (funds from relatives, including a spouse, or funds from other sources of income), then you could have a difficult time demonstrating that the money in that account is exempt. For that reason, all three attorneys I interviewed recommended keeping a separate bank or credit union account just for those funds.
[Related Article: New Federal Rule Protects Benefits from Garnishment]
Moran says, “The single most important step that a disability recipient can take to preserve the benefit is to keep the money in an account separate from any other assets or sources of income, so tracing the bank balance to (Social Security income) is easy. If you have choices, spend non-exempt income first and save the disability benefits. The protection for these funds does not vanish over time, so long as the funds can be traced to a protected source.” Ginsberg also urges his clients “not to put anyone else’s name on their Social Security account. Doing so does not eliminate the protected nature of the Social Security funds in such a joint account but you may find yourself having to pay a lawyer to defend a collection effort, or worse, trying to get your money back from a garnishing creditor.”
If a creditor or debt collector threatens to seize your SSDI or SSI payments because you have fallen behind on a consumer debt, contact a consumer law attorney immediately. The debt collector may be in violation of the federal Fair Debt Collection Practices Act. The FDCPA doesn’t apply to creditors collecting their own debts, but they may be breaking state law with that threat.
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